Mr. Glenn,
from the Committee on Governmental Affairs, submitted the following

CONFERENCE
REPORT together with ADDITIONAL VIEWS [To accompany S. 20]

The Committee
on Governmental Affairs, to which was referred the bill (S. 20) to
provide for the establishment, testing, and evaluation of strategic
planning and performance measurement in the Federal Government, and
for other purposes, having considered the same, reports favorably thereon
and recommends that the bill do pass.

The purpose
of S. 20, the Government Performance and Results Act of 1993, is to
improve the efficiency and effectiveness of Federal programs by establishing
a system to set goals for program performance and to measure results.

On March
24, 1993, the Committee on Governmental Affairs voted to report S.
20 as amended. The bill requires that, beginning in FY 1994, there
shall be at least 10 three-year pilot projects in program performance
goal setting, measurement, and reporting, and at least 5 two-year pilot
projects in greater managerial flexibility in return for commitments
to greater program performance. In 1997, OMB and GAO shall report on
the results of the pilot projects. By FY 1998, the requirements of
the Act for five-year strategic planning, annual program performance
plans, and annual program performance reports shall come into force
governmentwide. Also in 1997, OMB will begin at least 5 two-year pilot
projects in performance budgeting.

Public
confidence in the institutions of American government is suffering
from a perception that those institutions are not working well. Recent
public opinion polls indicate that this is particularly true with respect
to the Federal Government, as both Congress and the Executive Branch
are held in low esteem by the American people.

Much has
been made of the seeming inconsistency between the public's desire
for a wide range of government services, and that same public's disdain
for government and objections to paying higher taxes. The Committee
believes that part of the explanation for this apparent inconsistency
can be seen in the results of a recent public opinion poll which shows
that Americans, on average, believe that as much as 48 cents out of
every Federal tax dollar is wasted. In other words, the public believes
that it is not getting the level and quality of government service
for which it is paying.

The Committee
shares the public's frustration with waste, inefficiency, and ineffectiveness
in Federal programs. As the general oversight committee of the Senate,
it has a long history of examining and exposing those types of problems
throughout government. The committee has also authored a series of
legislative remedies which have been, or promise to be, very helpful
in addressing these problems-including the Inspectors General Act and
the Chief Financial Officers Act.

Following
on these measures, the Committee believes that the regular and systematic
measurement and reporting of program performance, compared to pre-established
goals, would be a major addition, providing a valuable supplement to
the Committee's previous work in the area of management improvement.
Governmental waste and under-performance will likely persist until
there is a change in the behavior of federal agencies. James Q. Wilson,
a noted student of government, stated it well in his book
"Bureaucracy: What Government Agencies Do and Why They Do It": "*
* * government management tends to be driven by the constraints of the
organization, not the tasks of the organization." A key step in
changing government behavior is to create a focus on results.

At present,
congressional policymaking, spending decisions, and oversight are all
seriously handicapped by the lack both of sufficiently precise program
goals and of adequate program performance information. Federal managers,
too, are greatly disadvantaged in their own efforts to improve program
efficiency and effectiveness by that same lack of clear goals and information
on results. The goal-setting, performance measurement, and results
reporting requirements of S. 20 are intended to address these needs
of Congress and of federal program managers.

This reform
has the potential to mark a significant change in the way that managers,
policymakers, and the American people think about what services the
government should provide, and how well it does at providing them.
The legislation will provide the information necessary to strengthen
program management, to make objective evaluations of program performance,
and to set realistic, measurable goals for future performance-ensuring
that the information is reliable will, of course, require attention
by agencies, OMB, GAO, and Congress.

The legislation
begins this effort with a series of pilot projects, recognizing that
while necessary, this is a new and challenging direction for Federal
agencies. However, the Committee believes that the eventual result
will be not just better oversight and improved performance, but greater
public confidence in the institutions of government.

ADMINISTRATION
POSITION

The Administration
expressly endorsed S. 20 at the March 11, 1993, hearing of the Committee
on Governmental Affairs. At that hearing, OMB Director Leon Panetta
stated that President Clinton, "has reviewed and discussed S.
20, the Government Performance and Results Act of 1993, and I am pleased
to be able to advise the Committee today that this Administration strongly
supports this bill." He described the reasons for the Administration's
support as follows:

S. 20 is
a major step toward making the Government accountable to the American
people by making it clear what the taxpayers are getting for their
money and removing some of the red tape that bedevils all of us. As
every other enterprise has learned, government officials must manage
for results, not just rules and regulations. This accountability both
empowers and rewards those who improve performance. S. 20 provides
us with a sound foundation as we go about the task of re-inventing
our government, and we urge its swift passage.

GAO
INTEREST

The General
Accounting Office has had a long-standing interest in improving government
management through the use of strategic planning and performance measurement.
Since 1973, GAO has produced over 70 reports on performance measures
and currently has nearly a dozen ongoing efforts to assess measurement
in specific agencies. At the Committee's October 3, 1990 hearing on "OMB's
Response to Government Management Failures", Comptroller General
Charles A. Bowsher testified:

We very
much support the development of performance measurements. It is something
that we have advocated for some time, and one interesting note is that
when I was dealing with some of the people from London during the last
few years on the issue of financial management, the one thing that
surprises them is that we are still talking about improving our accounting
system. They are moving on to performance measurement. In other words,
they have got the financial management and the accounting in place,
are getting good cost information, and their big debate now is what
are the performance measurements. And they have even got it down to
the local government level covering fire departments, trash hauling,
and similar services. It is impressive, and I think we could do it
here at the Federal level.

At that
hearing, Mr. Bowsher was asked if regular program performance reports
identifying objective measurable accomplishments compared against original
goals would be helpful in focusing Congressional oversight, and if
it would help GAO in its program evaluation activities. He responded:

Yes to
both. It would be very helpful I think to Congress to have this information,
and that is why I think you need an annual report from all these departments,
just like you have in the private sector, where you actually tell what
was your performance goals, what were you trying to achieve with the
program objectives, and how did you do. And it would help us immensely.
We waste half our time in doing our program evaluation work and our
financial audit work even in trying to figure out what is the goal
that was trying to be achieved and where is the information. We are
always over there trying to gather the data. It should be brought together
in an organized fashion by the agencies themselves.

We have
been working recently with the VA and with the Agriculture Department
to try to take some of the goals that are clear to us and that are
reasonable and try to relate those to financial information, and it
is amazing when you do that what you can see about an agency's operations.
You can see what the trends are. You can understand what the numbers
mean. And if we can get the agencies to supply us with measurable goals,
we can relate those to financial results and then you can see what
you are spending your money on and whether that money is well spent.
And that is my fond hope, that we can get that into our system of Government
and have it reported to the Committees of Congress as a regular matter
so that they can see the effectiveness of the money that they appropriate.
And you don't see this now, you really don't see that.

The issue
of performance measurement was a major focus of a February 1985 GAO
report entitled, "Managing the Cost of Government-Building An
Effective Financial Management Structure" (GAO/AFMD-85-35). That
report emphasized that reform of federal financial management should
stress (as one of four key areas) the "systematic measurement
of performance", arguing that "effective management of resources
requires examining the results of government activities as well as
their costs." The report stated that:

Whether
the goal is defending the nation or immunizing children against disease,
government officials and the public need to know how well government
is accomplishing its intended objectives. Assessing government accomplishments
requires measuring employee and program performance. Though the size
and complexity of the government make it difficult, developing effective
performance measurement systems is clearly possible.

The work
of nearly two-thirds of government employees, for example, can be measured
by means of formal productivity measurement systems. For the remaining
one-third, substantial time and effort may be required to develop reliable
measures of performance. Indeed, there may be some government activities
(such as basic research) for which quantitative measures are not feasible.
Even in these cases, however, qualitative measures can usually be developed
and used.

A well-developed
financial management structure should include performance information
that can be used both for day-to- day management and policy and budgeting
decisions.

The report
points out that several state and local governments have already done
this to a far greater extent than has the federal Government, and concludes
that "We are convinced that such a structure can be built for
the federal government."

At the
Committee's May 5, 1992, hearing on S. 20, the Comptroller General
reiterated his position that:

[A]gencies
need to clearly articulate their missions in the context of statutory
objectives and, with regard to services, citizen expectations. These
objectives need to be written in terms that can be used to judge progress
toward achieving them. It is essential that agreement be reached between
Congress, the Office of Management and Budget, and the executive agencies
on realistic, outcome-oriented goals if they are to use the data to
assess progress.

At the
March 11, 1993, hearing of the Committee on S. 20, he urged that "action
on the bill should not be delayed."

CHIEF
FINANCIAL OFFICERS ACT

The Chief
Financial Officers Act of 1990 (P.L. 101-576) (CFOs Act) acknowledges
the need for more attention to this issue. Though the primary purpose
of the legislation is the improvement of financial management activities
within the Federal Government, the Committee did include in that law
the beginnings of a greater focus on program results.

The CFOs
Act provides that the newly created position of Deputy Director for
Management at the Office of Management and Budget shall "Perform
all functions of the Director * * * relating to-(A) managerial systems,
including the systematic measurement of performance". Also, the
Act creates at 23 large agencies the position of Chief Financial Officer,
and requires that each CFO shall "develop and maintain an integrated
agency accounting and financial management system, including financial
reporting and internal controls, which- * * * provides for- * * * the
systematic measurement of performance".

However,
neither the Act itself, nor its legislative history, provides elaboration
on the phrase "systematic measurement of performance". The
February 1985 GAO report mentioned above does use that term, and discusses
it in a context where clearly it is meant to refer to the measurement
of program performance-that is, program outcomes and results, and not
financial performance. The CFOs Act does expressly require that agency
financial statements reflect "results of operations of those revolving
funds, trust funds, offices, bureaus, and activities", but a related
provision makes apparent that this presently refers only to an "office,
bureau, and activity of the agency which performed substantial commercial
functions during the preceding fiscal year."
Because revolving funds, trust funds, and commercial activities are only
part-often a small part-of an agency's operations, the annual financial
statement will provide a limited basis for addressing program performance.

Thus, within
the context of the CFOs Act, the legislative mandate for the "systematic
measurement of performance" of federal programs is presented in
a most minimal fashion. OMB has now begun to build upon that simply
stated mandate. In September 1991, and again in February 1992, it issued
guidance to agencies on preparation of annual financial statements.
OMB specified that the overview and supplemental financial management
information sections should present information and data on program
performance, and described different types of performance measures
that could be used and defined how the information should be presented.

The Committee
commends OMB for its efforts to use the CFOs Act as a means to begin
moving federal agencies toward systematic measurement and reporting
of program results. However, the Committee is concerned that by itself
the performance measurement mandate in the CFOs Act provides insufficient
emphasis for extending performance measurement across the full range
of agency program activities. Simply put, the broad program performance
and management improvement goals of S. 20's performance measurement
provisions are more inclusive than those of the CFOs Act's financial
management reforms. Institutionally, OMB's implementation of S. 20
must reflect that broader perspective.

Regular,
systematic, and comprehensive program goal-setting, performance measurement,
and results reporting is not an easy undertaking. Nor is it generally
a welcomed task by bureaucratic organizations. There is often much
institutional, and individual, resistance. The mandate for its implementation
must be unambiguous. The specific requirements must be clear. And the
effort must be sustained.

The Committee
believes that ultimate success in bringing about this new focus on
agency performance requires a firm statutory commitment. S. 20 provides
this commitment, underscoring a strong desire by Congress for reforming
this area, and extends and expands the performances measurement begun
with the CFOs Act. As the legislation makes clear, this is more than
just an Administration directive that can be rescinded or whose implementation
can be stalled while waiting for a new administration with a different
managerial agenda. The legislation signals an ongoing effort at implementation
of performance measurement and reporting, as fully as is feasible within
as many programs as is practical.

LESSONS
FROM HUD PROBLEMS

Senator
Bob Graham (D-FL) was the Committee's first witness at its May 23,
1991 hearing on S. 20. Senator Graham had himself presided a year earlier
at hearings of the HUD/Mod Rehab Investigation Subcommittee of the
Committee on Banking, Housing, and Urban Affairs. He testified that
his own subcommittee's investigation into the "HUD scandal"
showed that many of the problems uncovered at the Department of Housing
and Urban Development could have been avoided with better congressional
oversight, which he felt S. 20 would encourage:

In terms
of Congressional oversight, I am afraid the Congress has to bear a
serious part of the responsibility for what happened in HUD. There
were almost no hearings held during the relevant periods on what was
happening in the agency. Those hearings that were held were largely
episodic and reactive rather than focusing on the programs and how
well they were being administered. The recommendations made in Senator
Roth's bill would certainly go a long way towards creating the opportunity
for effective Congressional oversight. I strongly agree with the direction
of the bill as introduced by Senator Roth. I think its emphasis on
setting goals and performance standards, both within the Congress in
the shaping of legislation, and within the Executive Branch, are exactly
on point.

It would
help if congressional committees could press some of the agencies to
develop performance measures and output measures of what the agencies
think are good measures of whether they are accomplishing program objectives
* * *, That gives the Congress a basis for then going in and tracking
and saying how well things are happening, what type of problems there
may be, and if there are problems it gives you a basis for focusing
the oversight. Unfortunately, most agencies do not want to develop
those types of performance measures because it is easier not to be
held accountable if you do not have them.

Also at
that same hearing on the HUD scandal, Richard A. Wegman, Chairman of
the Congressional Oversight Panel of the National Academy of Public
Administration, had testified:

It's essential
that there be clear and explicit performance goals for executive branch
programs. This would enable agencies to provide a better match between
these goals and the resources available to carry them out. Clarity
is extremely important; otherwise, it's very difficult for Congress
to make a judgment about whether or not the agency is doing its job
effectively.

GOVERNMENT
MANAGERS

The Committee
took particular note of the fact that organizations of current and
former government managers strongly support the goals of S. 20, and
that they made many useful suggestions in the development of the Committee's
substitute amendment. These organizations stated that the systematic
collection of program performance information, related to outcome-oriented
goals, is vital to helping managers do their jobs well.

The National
Academy of Public Administration rarely takes policy positions, so
its adoption of a supporting resolution at its November 1991 annual
meeting is especially significant. The NAPA resolution pointed out
that few government agencies provide timely information on the quality
and outcomes of their major programs, but that public officials and
citizens need this type of information-"not only information on
program costs and the amount of work completed-but also information
on the quality of service delivery and on the outcomes achieved through
the use of tax dollars and other public resources."

In calling
for agreement between the policymaking and operating levels of government
on appropriate indicators of program cost, quality and quantity of
services, and important program outcomes, the NAPA resolution stated
that:

The National
Academy of Public Administration strongly recommends that units of
government at all levels make a concerted effort to encourage agency
heads and program managers to monitor program quality and outcomes
as part of an overall system aimed at improving the performance and
credibility of major public programs. Performance monitoring should
be an essential part of program administration and the budget process
* * * chief executives, agency heads, and program managers should propose
realistic performance targets in terms of program goals and agreed-on
program quality and outcome indicators-and subsequently monitor and
report on progress in achieving those performance targets.

Similarly,
the American Society for Public Administration also adopted a resolution
of support at its April 1992 annual meeting. Noting the fact that program
managers' technical data are seldom translated into performance information
that policy executives and elected officials can understand, ASPA stated, "Regular
measurement and reporting of program effectiveness (including quality,
timeliness, and outcomes) and efficiency can provide a new performance-based
language for improved communication among program managers, central
policy executives, and elected officials."
ASPA felt this would help in the development of mutual expectations of
program performance at specific funding levels, and make for more informed
policy and operational decisions. The resolution explained that:

There is
a history of successful uses of performance measurement and reporting
by government organizations at all levels, providing that it can improve
decision making, accountability and responsiveness to citizens, and
program performance. However, use of performance measurement is still
the exception rather than the norm in American government organizations.
Most reports on government operations focus on expenditures and activity
counts or numbers served. Few provide timely information on program
effectiveness and efficiency. Thus there is great potential to improve
performance, accountability, and responsiveness by implementing systematic
performance measurement, monitoring, and reporting, and by integrating
performance information into regular policy and management processes.

The Committee
realizes that, as valuable as the goal-setting and performance reporting
under S. 20 will be to Congress in its policymakiung and oversight
roles, its greatest value will likely be to the program managers themselves.
First of all, they will have a much better sense of what is expected
of them and their programs. Presently, many mangers are seriously handicapped
by a lack of clear programmatic direction. And second, they will get
regular consistent feedback on measurable progress toward meeting those
expectations. Managers will use this information throughout the year
to plan their activities and guide their subordinates. The Committee
believes that S. 20 has the potential to be a powerful tool for strengthening
governmental management.

The Committee
found that the use of program goal-setting and performance measurement
is a growing trend in State and local governments, and also at the
national government level in several foreign countries. The May 12,
1992, edition of "Financial World" magazine labeled performance
measurement and program evaluation "perhaps the most important
trend in state government in the 1990s". At the Committee's first
hearing on S. 20, on May 23, 1991, testimony was received on the experiences
of the State of Florida's Children, Youth and Family Services, and
from the City of Sunnyvale, California.

The State
of Florida enacted legislation in 1986, requiring its Children, Youth
and Family Services office (part of its Department of Health and Rehabilitative
Services) to monitor and report client-outcomes for children serviced
by 34 State program components covering more than 275 separate programs.
As mandated, the CYF Outcome Evaluation focuses on the results of services,
rather than simply on outputs such as numbers of clients served and
the amount of service provided. Program goals are defined in terms
of expected results, and there is an annual Outcome Evaluation Report
to the secretary, the governor, and the legislature.

In response
to the Committee's question about the effect outcome measurement and
reporting has had on program management, the Department submitted testimony
stating that it has had "very useful and far-reaching effects." Among
the major impacts cited in the testimony were:

Outcome
information is used increasingly in our budget and appropriations processes.
* * * In the 1991 legislative session, for instance, our report was
very much in evidence at appropriation committee meetings-on legislators
desks, and in the hands of legislative and agency staff, lobbyists,
and advocates * * *.

We have
identified programs for closer scrutiny, that is, our report provides
a useful tool for targeting our own monitoring efforts. Program improvements
have been made as a result * * *.

Perhaps
most important, our work has sensitized us and others (the courts,
advocates, contract service providers, and even to some extent the
media) to the importance of thinking and acting with respect to results
or outcomes for those whom we serve.

The testimony
also pointed out that the success of Florida's Children, Youth and
Family Services outcome evaluation system "is evident in legislation
passed earlier this year, to extend in law the requirement for outcome
evaluation to all programs under the department's jurisdiction."
Under this extension-to the entire $8-billion a year Department of Health
and Rehabilitative Services-the Secretary is authorized to set aside
up to one-half of one percent of all program budgets for outcome evaluation.

The Committee
also heard testimony from the city manager of Sunnyvale, California.
That city began to develop a very sophisticated system of program performance
measurement, incorporated directly into its budget system, in 1973-as
part of a pilot project developed with the U.S. General Accounting
Office. OMB testified that Sunnyvale's system "stands out as the
single best example of a comprehensive approach to performance measurement
that we have found in the United States. * * * One underlying reason
for the success achieved in Sunnyvale is the fact that every program
manager uses the system to plan, manage, and assess progress on a day-to-day
basis."

Sunnyvale
began the implementation of its system on a pilot project basis, starting
first with its Public Safety Department, and gradually adding sophistication
and capabilities as it spread government-wide. The city now tracks
hundreds of workload outputs (including unit-costs), and service outcomes.
Examples of program performance objectives include: achieve fewer than
10 complaints a year for poor information services by the City Hall
lobby reception and telephone information service; repair damage from
vandalism within 3 days; successfully respond to library user information
requests at least 95 percent of the time; achieve a positive rating
from at least 90 percent of recreation class participants; respond
to emergency police calls within 5.6 minutes or less 90 percent of
the time; maintain crime rate within the lowest 25 percent of cities
of comparable size; maintain files of all documents so that they can
be retrieved within 5 minutes 85 percent of the time.

Each year
the city manager submits a detailed Annual Performance Report to the
mayor and city council, indicating how well the performance objectives
have been achieved. All of those objectives, in turn, are tied into
twenty-year strategic plans covering 28 areas of city service, showing
long-term goals for the City.

At the
Committee hearing, Sunnyvale's city manager was asked whether it was
difficult to achieve bipartisan agreement on expected program results.
He responded:

[W]hat
can become possible is through articulating outcomes this way, things
have a potential of becoming less political as opposed to more political.
There tends to be a focus on what everyone wants, and all of a sudden
people on either side of the spectrum find out they want the same thing,
and so they are articulating it in outcome terms instead of political
terms. It has reached the point in local political campaigns * * *
that even newcomers on the scene have now begun to articulate their
platforms in terms of outcomes, even before they get into the political
process. So at our level it has sort of been institutionalized, and
certainly I think, if any thing, depoliticized the appropriation process.

The effectiveness
of Sunnyvale's system of performance measurement is cited in the book "Reinventing
Government," by David Osborne and Ted Gaebler. The authors point
out that:

Between
1985 and 1990, the city's average cost per unit of service went down
20 percent, after factoring out inflation. (In other words, its productivity
increased by roughly 4 percent a year.) In 1990, when it compared its
own costs to those of similar size and type cities, Sunnyvale found
that it used 35 percent to 45 percent fewer people to deliver most
services. Its employees were paid more, but its operating budget was
still near the low end of comparable cities, and its per capita taxes
were lower than those of any comparable city in its sample.

In its
most recent citizen survey, over 90 percent indicated satisfaction
with the quality of city services.

With regard
to foreign countries' experiences with performance measures, work by
the Paris-based Organization for Economic Cooperation and Development
suggests that several countries may be 5 to 10 years ahead of the U.S.
in this effort, and that their performance measurement efforts are
a key part of broader efforts to better manage for results. The key
themes in their efforts have been, first, to better clarify agency
and managerial accountability for results by defining goals clearly,
developing measures, and reporting on progress. And second, to give
managers the flexibility to manage for results by providing them the
tools and incentives to act.

At the
second hearing on S. 20, on May 5, 1992, OMB's Deputy Director for
Management, Frank Hodsoll, summarized the experiences of several foreign
governments. He noted that Australia is "at the leading edge in
performance measurement." That country has a well-developed system
involving strategic planning, annual work plans, performance reporting,
and program evaluation. Program objectives and strategies for achieving
them are well-defined. In addition, the government annually publishes
a 19 volume set of detailed program performance statements relating
expenditures to program performance. He added that:

It should
be noted, however, that Australian program officials have much more
latitude than we do in how they spend operating funds. For example,
Australian officials can shift funds from staff to computers without
Parliamentary concurrence. But Australian officials are more accountable
for the performance of their programs; the annual work plans link program
objectives and the performance agreements on which ministry officials
are evaluated.

The experience
of the United Kingdom was also described. That country's effort began
in 1982 with its Financial Management Initiative (similar to our CFOs
Act). In 1988 the U.K. launched its "Next Steps Initiative",
which places special focus on the development of output and performance
measurement for executive functions. Ministries are required to development
systems through which managers at all levels in the national government
will have a clear view of their objectives, and the means to measure
and assess performance in relation to those objectives.

The U.K.'s
National Audit Office reports that the ministries have made
"worthwhile progress" and that the quantity and quality of
performance information has significantly improved in recent years. OMB's
assessment of the U.K.'s experience is that progress apparently depends "on
the complexity and structure of the ministry, the nature of the ministry's
work, and the available resources. There are also often inherent difficulties
in devising performance indicators that measure the impacts of policies,
allow for the effects of factors outside of Governmental control, assess
the quality of services provided, and quantify the results of basic research."

The Committee
agrees with OMB's conclusion in its hearing testimony that because
of the uniqueness of the U.S. Federal Government's structure, "there
are no domestic or international proto-types on which we might model
a Federal system". Those national governments which have been
much greater progress than our own in program performance measurement
have a Parliamentary form of government, where heads of ministries
are usually also members of Parliament. Nonetheless, as OMB points
out, "Even though no specific prototype exists, our review of
these systems has been helpful in determining what elements appear
to be essential for a successful system. The review can also help us
to learn from others' experiences and mistakes."

The Committee
believes it is important that performance measurement not be a major
additional cost item or paperwork burden imposed upon Federal programs.
This issue was a subject of specific inquiry during the hearings on
S. 20. Most of the witnesses indicated that program performance measurement
need not be a significant cost or administrative burden. The Committee,
however, has included within the pilot projects of S. 20 the requirement
that this issue be examined and reported on to Congress.

In response
to a question about the implementation cost of performance measurement
throughout the Federal government, Frank Hodsoll, OMB Deputy Director
for Management, testified that based on OMB's work with various agencies
in this area of performance measurement, he thought the cost would
be very small and absorbable within the current system. This view was
supported by Charles Bowsher, U.S. Comptroller General, who responded
that he did not think the cost would be great, and that the primary
costs would be in additional training expenses.

In looking
at specific examples from State and local government, the Committee
found similar reactions. The City of Sunnyvale, California is generally
recognized as having the most comprehensive system of performance measurement
of any government in the country. Its city manager, Tom Lewcock, testified
that Sunnyvale's system of program performance measurement and budgeting
was implemented without the addition of any new personnel. He explained
that this was because it replaced a more traditional system of accountability,
rather than being simply added to it.

Florida's
Children, Youth and Family Services is a state program nationally recognized
for its sophisticated measurement of program outcomes and results.
Its Chief of Research and Development, Dennis Affholter, testified
that it generates information very similar to that mandated by S. 20,
and that, "A small staff properly equipped can do this job * *
*. It cost us about a quarter of a million dollars to support the staff
to do this job out of a total budget that approaches $500 million *
* *."

The Committee
received other testimony that this type of measurement might potentially
be costly, but the agencies should be able to measure their performance
effectively with no more than one percent of their program funds (and
much less for some of them). It was also pointed out that there is
already a great deal of such data collection going on in federal programs
and that this activity could be re-directed, coordinated, and the data
better reported and used.

This latter
point was supported by a GAO study released at the second hearing on
S. 20.

At the
request of the Committee, GAO surveyed the existing status of performance
measurement in federal agencies. That study, entitled
"Program Performance Measures-Federal Agency Collection and Use
of Performance Data" (GAO/GGD-92-65), was released May 5, 1992.

GAO surveyed
103 federal agencies to determine the extent to which they had created
strategic goals and collected measures of progress toward meeting those
goals. About two-thirds said they had a single long-term strategic
plan, and three-fourths said they collected a wide variety of data
to assess program performance.

In describing
the conclusions GAO reached from further examination of agency activities,
Comptroller General Charles A. Bowsher testified:

However,
when we visited a sample of these agencies, we found that most used
the information at the program level. While this information was useful
at the program level, it was fundamentally different from that needed
to manage or make strategic policy decisions for the agency as a whole.
Only 9 of the 103 agencies reported having an administrative infrastructure
in place for developing and reporting results. By this we mean that
there were few offices that routinely collected performance data and
prepared regular reports on progress toward goals set in strategic
plans.

He stated
that agencies were using their performance measurement systems for
a wide variety of purposes (e.g., organizational accountability, budget
decisions, individual employee rewards), and that in recent months
there has been some movement toward developing results-oriented performance
measures. However, as the GAO report points out, the uses were almost
exclusively to provide internal information relating to past activities
or present operations, and not to assess progress towards goals in
their strategic plans.

Despite
these limited uses of performance measurement by federal agencies,
the Committee is encouraged by the findings of the GAO survey. The
report verifies a great deal of existing activity that provides a foundation
for implementation of S. 20. The legislation can give these efforts
better direction, structure, and coordination. It can expand their
development and broaden the uses. And it can provide for much better
public and congressional dissemination of the information.

The key
elements of an effective program performance measurement system are
strategic plans, annual performance plans, and annual performance reports.
The Government Performance and Results Act establishes these elements.
In addition, it provides for the possibility of waivers for increased
managerial accountability and flexibility, and it tests the development
of program performance budgets. Development of these plans and reports
is defined as being an inherently governmental function, meaning that
while assistance may be provided by other parties, actual formulation
of the final products must be the responsibility of federal managers.

STRATEGIC
PLANS

Strategic
plans are the starting point and basic underpinning for a system of
program goal-setting and performance measurement that will be established
throughout the Federal Government. A multi-year strategic plan articulates
the fundamental mission (or missions) of an organization, and lays
out its long-term general goals for implementing that mission, including
the resources needed to reach these goals.

The clearer
and more precise these goals are, the better able the organization
will be to maintain a consistent sense of direction, regardless of
leadership changes at the top. This is particularly important in the
Federal Government, where turn-over in top-level positions (such as
Assistant and Deputy Assistant Secretary) occurs on a perhaps too frequent
basis.

Even when
a change in Administration brings about a shift in political philosophy,
the program's missions and long-term general goals remain largely intact.
The priorities and means of achieving those goals, and the approach
to problem-solving, may vary significantly, but the long-term goals
usually remain the same. Plans for how an agency will maintain its
continuous operations and progress towards those long-term goals is
vitally important.

As has
previously been pointed out, many agencies already have what they call "strategic
plans", but these are generally inadequate and poorly used. A
major problem with many is that they have little direct linkage to
the agency's daily operations, which greatly weakens their effectiveness.

PERFORMANCE
PLANS

Annual
program performance plans are what provide the direct linkage between
an agency's longer-term goals (as defined in the strategic plan) and
what its managers and staff are doing on a day-to-day basis. These
plans are often hierarchical in form, showing what annual performance
goals need to be accomplished at each level in order for the next higher
level to meet its own goals.

Performance
goals may relate to either "outputs" or "outcomes",
the latter usually being the most important for policy purposes, but
the former often being a useful management tool (especially when their
per-unit costs are also tracked). A common weakness in program performance
plans is an over-reliance on output measures, to the neglect of outcomes.
Eligible clients completing a job training program are outputs; an
increase in their rate of long-term employment would be an outcome.
There could be similar outcome goals measuring the effectiveness of
Federal community development block grants, such as percentage increases
in property values and net new jobs created within the targeted areas.
Even at the lowest operational level, there can be goals for processing
time, error rates, customer/citizen- satisfaction levels, etc.

It is very
important that annual performance plans include goals, not just for
the quantity of effort, but also for the quality of that effort. These
goals should be as specific as possible, they should drive much of
the daily operations of the agency, and they should aim at achieving
the long-term general goals of the agency's strategic plan.

It is also
important that the resources needed to achieve the goals be indicated
as part of the plan. The Committee is concerned about the "hollow
government" phenomenon-where an agency has inadequate resources
to meet its public missions. Whether the proper remedy is to increase
the level of resources allocated, or to reduce the level of service
to which the agency is committed, both should be brought into balance.
The annual performance plan should show how program goals will be supported
through sufficient management skills and human, budgetary, and physical
resources.

Not all
governmental programs lend themselves easily to measurable goals. For
some it will be very difficult, and for a few, perhaps impractical
altogether. Nonetheless, managers should resist the temptation to decide
too quickly that a particular program is unsuitable for measurable
goals. The fundamental question is, what is the difference between
a successful program and a failure? Between a well-run operation and
one that is mismanaged? How can we tell the difference, and how should
that be defined? If the difference cannot be defined, then is that
not just an invitation to waste, inefficiency, and ineffectiveness?

PERFORMANCE
REPORTS

Annual
program performance reports are the feedback to managers, policymakers,
and the public as to what was actually accomplished for the resources
expended-in other words, how well the original goals were met. This
type of information is ideally available to program managers on a more
regular basis throughout the year, but at a minimum there needs to
be an annual compilation and reporting of results.

There may
be more performance information tracked by the agency for management
purposes than is summarized in the annual report, but there should
be a match between the report and the goals of the previous performance
plan. And while the nature of some of what is measured might change
periodically, that should not be a frequent, widespread occurance (especially
after the first few years' experience). Otherwise, it will be difficult
to spot trends in program performance, which is often the most revealing
type of information for managers and policymakers.

The Government
Performance and Results Act also asks that the annual performance reports
include explanatory information on goals not met. This includes plans
for achieving the goals, or reasons why that is not possible and recommended
action. The goal itself might be unreasonable, given the resources
allocated. Or the goal might be reasonable, if the program is restructured.
Or an unforeseen occurrence might have interfered with the goals attainability.
Or the entire underlying premise of the program might be flawed. Or
the program might simply have been mismanaged. Each of these and other
possible explanations suggest different responses by top executives
and the Congress.

Finally,
the reports should also relate performance measurement information
to program evaluation findings, in order to give a clear picture of
the agency's performance and its efforts at improvement.

MANAGERIAL
FLEXIBILITY WAIVERS

The Committee
recognizes that Federal managers, as a general rule, are greatly limited
in their ability to shift resources around within their programs, and
to exercise other forms of managerial discretion. Rather than being
held accountable for achieving results, they are generally held accountable
for following detailed and specific procedures, within programs whose
structures are rigidly mandated.

The Committee
heard considerable testimony that governmental program results can
often be improved if the balance between those two forms of accountability
were shifted somewhat. This is, it has been the experience of other
governments (local, state, and foreign) that managers can improve program
performance if there is more specific agreement on what they are to
accomplish, if they are given greater managerial flexibility, and then
held accountable for the result. The British government, for example,
signs agency heads to employment contracts with measurable goals for
program performance, while giving them wider latitude in how they expend
allocated resources to accomplish those goals.

At the
March 11, 1993, hearing on S. 20, Comptroller General Charles A. Bowsher
testified that,

[T]he experience
of some states and other countries suggests that providing greater
flexibility and incentives for managers to act is critical to fundamentally
improving agencies' performance. These governments granted managers
greater freedom by

- reforming
their civil service systems to make it easier for agencies to hire
and to provide different compensation, incentive, and promotion systems;

- recasting
their budget execution systems to allow multiyear budget allocations,
gainsharing, and a reduced number of line items in their appropriations;

- devolving
more responsibility for control of operations away from central management
agencies and creating an environment where managers are held more responsible
for their actions; and

- streamlining
acquisition processes and allowing choice between government and nongovernment
service providers.

Along with
this increased flexibility, the governments also increased accountability-but
for results rather than processes.

The freedom
to be innovative and creative, and to marshal resources as seen appropriate,
is also one way to improve the morale and self-esteem of program staff.

For the
reasons, the Act includes a provision for the granting of managerial
accountability and flexibility waivers; that is, the opportunity to
be exempt from certain specific types of non-statutory administrative
procedural requirements, in return for achieving greater program results
than would otherwise occur. OMB would have to approve such waivers-the
agreed conditions and promised benefits of which would be specifically
spelled out. The requirements eligible for waiver are exclusively those
regarding the internal allocation and use of resources. They do not
include any requirements that directly affect persons or activities
outside the agency. The Act does not give agencies the authority to
waive statutory provisions or regulations promulgated under the Administrative
Procedure Act.

The Committee
recognizes that there will always be a need for certain procedural
controls on management discretion. This is one reason the additional
flexibility granted under the Act is fairly limited. Also, such flexibility
is not intended as a way around existing labor agreements, Civil Service
laws, or to permit inappropriate favoritism. Nor should it undermine
organizational morale. However, given the need for government programs
to find innovative ways to
"do more with less", the Committee believes that the Act provides
an important first step in a direction that may pay significant dividends.
Experimentation in this area would be worthwhile.

PERFORMANCE
BUDGETING

Traditional
line-item budgets sent annually to the Congress are rather imprecise
policymaking documents, and are rarely effective as management tools.
Line-item budgets show how much the President proposes to spend on
each program, and how that money should be allocated among various
accounts. That format, however, provides a fairly weak linkage to anticipated
program results. In other words, it shows how the money should be spent,
but not what should be accomplished.

Particularly
during this time of very tight budget constraints, it is important
that Congress develop a clear understanding of what it is getting in
the way of results from each dollar spent, and how those results would
change with an increase or decrease in funding. In all likelihood,
Congress will face difficult, wrenching budget decisions for years
to come. But even if the budget were balanced, and revenues strong,
this information would be important in the making of wise spending
decisions.

Therefore,
it would be most useful if Congress received a budget showing a direct
relationship between proposed spending and expected results, along
with the anticipated effects of higher or lower amounts. To use a hypothetical
example, a survey of National Parks visitors might show that they give
their experience an average rating of 3.7 on a 5-point scale. After
examining the specifics of the survey results (i.e., what were the
problem areas, in which parks), the Park Service might indicate that
for an additional 5 percent in funding, it expects to be able to raise
the average score to a 4.0. On the other hand, a 5 percent cut might
result in a drop to 3.5. Likewise, in this example, the Park Service
could show how rising costs or needed capital improvements require
increased spending to maintain current services, and to what extent
those services might decline if current spending is maintained or decreased.
Congressional committees, of course, would examine the rationale underlying
those assumptions, but they would have more concrete information on
which to base their decisions.

The Government
Performance and Results Act addresses the need for this type of information
in two ways. First, it requires the President, beginning with FY 1999,
to submit an overall Federal Government performance plan along with
the budget, derived from the agency performance plans. While this is
not a performance budget as such, it would be a very helpful first
step. It begins to explicitly link expected results with expenditures
in the budget. And second, the Act requires that there be two-year
pilot projects in performance budgeting (linking anticipated results
to alternative spending levels) in at least five Federal programs,
beginning in FY 1998. It then calls for a report from OMB on these
tests, along with recommendations on whether the entire Budget ought
to be cast in those terms. New legislation would be required for full
implementation.

The Committee
believes that this pilot project approach is best because, while performance
budgeting promises to link program performance information with specific
budget requests, it is unclear how best to present that information
and what the results will be. For example, GAO, in "Performance
Budgeting: State Experiences and Implications for the Federal Government" (GAO/AFMD-93-41,
February 1993), reports:

Despite
long-standing efforts in states regarded as leaders in performance
budgeting, performance measures have not attained sufficient credibility
to influence resource allocation decisions. Instead, according to most
of the state legislative and executive branch officials we interviewed,
resource allocations continue to be driven, for the most part, by traditional
budgeting practices. Reasons for this condition include difficulties
in achieving consensus on meaningful performance measures, dissimilarities
in program and fund reporting structures, and limitations of current
accounting systems.

Accordingly,
pilot projects will allow OMB to test possible approaches and develop
capabilities towards realizing the potential of performance budgeting.
At the March 11, 1993, hearing of the Committee, OMB Director Panetta
emphasized the Administration's commitment to this endeavor:

With this
bill, we will immediately undertake a more limited-but very useful-form
of performance budgeting, in which the performance goals that are annually
set will conform with the level of resources requested in the budget.
Starting next year with the pilot phase of S. 20, we will begin building
a system that comprehensively sets out to correlate performance, particularly
results-oriented performance, with budgeted amounts.

The Committee
recognizes that the reforms of S. 20 are a major undertaking. Comprehensive
program goal-setting, and performance measurement and reporting, on
a government-wide basis will not be accomplished easily. Many Federal
agencies will have to think about their programs in ways they are not
now accustomed-with a focus on results. Determining what to measure
and how to measure it, and then collecting information that is both
accurate and meaningful, will be challenging for many organizations.
It may be several years before a truly effective performance measurement
system is operating.

Past efforts
at comprehensive management reform, such as the Planning-Programming-Budgeting
System (PPBS), and Zero-Based Budgeting (ZBB), though equally well-intended,
were less than satisfactory. New information technologies, unavailable
in past decades, should now be a great advantage in bringing about
successful program performance measurement. However, this effort will
require careful planning and thoughtful execution, because the ultimate
objective is to change agency and managerial behavior-not to create
another bureaucratic system.

PILOT
PROJECTS

One of
the lessons learned from the experience of other governments studied
by the Committee, OMB, and GAO is that it is best to begin with several
pilot projects. Focusing on doing it right in a handful of programs-often
learning on a trial-and- error basis-maximizes the likelihood of ultimate,
government-wide success.

Because
the Committee feels it is important not to try to do too much, too
soon, S. 20 mandates that the requirements of the Act first be tested
on a pilot project basis for three years (FY 1994, 1995, and 1996).
This will give OMB the opportunity to study those examples and to develop
useful guidance for more full-scale implementation. Congress too will
have the opportunity to make changes to the underlying statute, if
the pilot project experiences suggest needed modification.

The legislation
allows OMB to designate the pilot project programs, in consultation
with agency heads, but specifies that there shall be at least ten such
pilots, and that they shall "reflect a representative range of
Government functions and capabilities in measuring and reporting program
performance." In other words, there shall be pilot projects in
defense programs as well as social programs, and in difficult to measure
areas as well as presumably easier areas.

Another
lesson from other countries is the need to create incentives for managers
to want to use performance measures. Having failed at effective performance
measurement in the past, countries such as Australia and the United
Kingdom have more recently found that providing agencies greater flexibility
to manage seems to increase the chances of success in getting performance
measures used. This was done by reducing central agency constraints
on actions in personnel, budget, and procurement.

Based on
this experience the legislation mandates that, from among the pilot
projects, at least five also test "managerial accountability and
flexibility" to see if the influence of incentives will, as in
the other countries, increase the chances for successfully implementing
better accountability systems. This additional flexibility is defined
as the granting of exemption from certain specified types of internal,
administrative requirements (dealing primarily with the shifting of
funds between certain internal accounts), in return for agreeing to
achieve even greater program results. Statutory requirements could
not be waived.

After the
three-year pilot projects in program performance measurement, OMB and
GAO will each issue reports to Congress on the results of those tests,
in mid-1997. Governmentwide implementation of the Act's requirements
will begin in FY 1998.

Many Federal
programs assisting or affecting the public are administered by States
and local governments. Their role in delivering services directly to
the public is often greater than that of the Federal agency funding
the program. A number of States and local governments have, or are
developing, a capability to set strategic goals and extensively measure
program performance. For these reasons, the Committee encourages OMB
and the agencies to work with States and local governments during this
three-year pilot project phase to examine ways for reflecting the role
of third parties in agency performance plans and reports.

During
this pilot phase, the Committee also encourages that studies be done
on the use of waivers. These waivers would give State and local officials
greater flexibility, in exchange for their sharing with Federal officials
an increased accountability for program results and improved performance.
The waivers should look at the application of existing statutory demonstration-type
authority or waiver authority currently contained in agency rules.
These studies of State and local waivers does not, of course, give
agencies any new authority to waive statutory or non-statutory requirements,
though recommendations in that regard could be contained in the OMB
report on the pilot projects.

TIMELINE
FOR IMPLEMENTATION

Just as
important as beginning cautiously in implementing these performance
measurement requirements, is the necessity of a clear, long-term commitment
to the reforms. The Committee felt it important to outline a comprehensive
plan for phase-in of the Act's requirements, from pilot projects through
governmentwide program performance reporting. This will put all Federal
agencies on notice, even those not participating in the pilot projects,
that they should begin now preparing for a new focus on reporting the
results of their programs. The general timeline for implementation
of S. 20 is as follows:

On October
3, 1990, Senator Roth introduced S. 3154, the "Federal Program
Performance Standards and Goals Act of 1990", which was referred
that same day to the committee on Governmental Affairs. No hearings
were held on the bill, but it was discussed by Senator Roth and witnesses
at the October 3 and 11 hearings on "OMB's Response to Government
Management Failures" held by the Committee on Governmental Affairs.

102d Congress

On January
14, 1991, Senator Roth introduced S. 20, the "Federal Program
Performance Standards and Goals Act of 1991", which was referred
that day to the Committee on Governmental Affairs. The legislation
differed from the version introduced in October 1990 only by the addition
of a Findings and Purposes section.

The Committee
on Governmental Affairs held hearings on S. 20 on May 23, 1991 and
May 5, 1992.

May 23,
1991-hearing on S. 20

The Committee
on Governmental Affairs heard testimony from the following witnesses:

The Committee
on Governmental Affairs considered S. 20 on August 5, 1992. It adopted
by voice vote an amendment in nature of a substitute offered by Senators
Glenn, Roth, and Cohen, retitling the bill the
"Government Performance and Results Act of 1992", providing
for initiation of implementation with a set of 3-year pilot projects
before governmentwide application, and making other changes, and voted
to report the bill favorably by voice vote.

The Committee
on Governmental Affairs reported S. 20 (S. Rept. 102-429) as amended
on September 29, 1992, and the Senate passed the bill on October 1,
1992, under unanimous consent.

103d Congress

On January
21, 1993, Senator Roth (with Senators Glenn, Graham, Metzenbaum, McCain,
Akaka, Robb, and Lugar as cosponsors) reintroduced the bill as S. 20,
the "Government Performance and Results Act of 1993", which
was referred that same day to the Committee on Governmental Affairs.
The legislation was very similar to the version passed by the Senate
the preceding year.

The Committee
on Governmental Affairs held a hearing on S. 20 and other legislation
on March 11, 1993.

March 11,
1993-hearing on s. 20

The Committee
on Governmental Affairs heard testimony from the following witnesses:

Martin
Gross, author of "The Government Racket: Washington Waste A to
Z"; and

Peri Arnold,
Professor of Government, University of Notre Dame, South Bend, Indiana.

The Committee
on Governmental Affairs considered S. 20 on March 24, 1993. It adopted
by voice vote an amendment by Senator Glenn and an amendment by Senator
Pryor, and voted to report the bill favorably by voice vote.

Congress
finds that-(1) waste and inefficiency in Federal programs undermine
the confidence of the American people in the Government and reduces
the Federal Government's ability to adequately address vital public
needs; (2) Federal managers are seriously disadvantaged in their efforts
to improve program efficiency and effectiveness, because of insufficient
articulation of program goals and inadequate information on program
performance; and (3) congressional policymaking, spending decisions
and program oversight are seriously handicapped by insufficient attention
to program performance and results.

The purposes
of this Act are to-(1) improve the confidence of the American people
in the capability of the Federal Government, by systematically holding
Federal agencies accountable for achieving program results; (2) initiate
program performance reform with a series of pilot projects in setting
program goals, measuring program performance against those goals, and
reporting publicly on their progress; (3) improve Federal program effectiveness
and public accountability by promoting a new focus on results, service
quality, and customer satisfaction; (4) help Federal managers improve
service delivery, by requiring that they plan for meeting program objectives
and by providing them with information about program results and service
quality; (5) improve congressional decisionmaking by providing more
objective information on achieving statutory objectives, and on the
relative effectiveness and efficiency of Federal programs and spending,
and (6) improve internal management of the Federal Government.

This section
requires that each agency prepare a strategic plan for program activities
covering at least a five year period, and that such plans be updated
at least every three years. The first of these plans shall be submitted
to the Director of the Office of Management and Budget (OMB) and to
Congress by September 30, 1997. The Committee expects that OMB may
establish appropriate dates for submitting subsequent strategic plans,
but once submitted by the agency head, a strategic plan is not subject
to approval by OMB or any other government entity.

The basic
content of a strategic plan shall consist of a comprehensive mission
statement, a set of general goals and objectives and the approach that
will be used in achieving them, including the necessary resources,
and a description of any key external factors that may significantly
affect achievement of the goals and objectives.

The plans
should be succinct and precise. Agencies may choose to develop separate
strategic plans for major component organizations or functions, but
these separate plans must be subsequently incorporated into a single,
agency-wide document.

The agency
mission statement should concisely summarize what the agency does,
as required by law, presenting the main purposes for all its major
functions and operations. The general goals should elaborate on that
statement. These goals constitute a specific set of policy, programmatic,
management objectives for the programs and operations covered in the
strategic plan, and serve as a framework from which the annual performance
goals are derived. The general goals should correspond to the purposes
set forth in the mission statement, and develop with greater specificity
how an agency will carry out its mission.

The general
goals need not be in a quantitative or measurable form, but they must
be expressed in a manner that allows a future assessment of whether
a goal is being achieved.

The strategic
plan is also to contain a description of how the agency intends to
achieve the general goals. This description should cover the overall
approach that will be taken over the time period covered by the plan,
including a schedule for significant actions and the needed resources.
It should indicate how the goals of the annual performance plans required
by section 4 will be used to measure progress in achieving the general
goals of the strategic plan, and the underlying basis for any assumptions
or projections.

The key
external factors that could significantly affect the achievement of
the general goals and objectives, and which should be explained in
the strategic plan, can include both governmental and non-governmental
factors.

Because
measurement of outcomes often relies on an analytic process known as
program evaluation, the strategic plan is to contain a section explaining
how completed evaluations were used to establish or revise general
goals, and set out a schedule for periodic future program evaluations.

The strategic
plan is intended to be the principal means for obtaining and reflecting,
as appropriate, the views of Congress, and those governmental and non-governmental
entities potentially affected by or interested in the agencies' activities.
Although development of the plan is not subject to formal procedural
requirements such as the Administrative Procedure Act, the agency shall
solicit and consider views of interested members of the public in the
process of preparing the plan. An agency's strategic plan shall be
a matter of public record, and shall be disseminated as appropriate,
with the public offered an opportunity to obtain copies of the completed
plan. Copies shall also be sent to Congress, including the Senate Committee
on Governmental Affairs, the House Committee on Government Operations,
and the appropriate authorization and appropriations committees and
subcommittees.

The preparation
of either an agency's or the Postal Service's strategic plan, annual
performance plan, and annual program performance report under this
Act are declared to be inherently governmental functions. In defining
these activities in this manner, the Committee was guided by the OMB
policy letter of September 23, 1992, which established Executive Branch
policy relating to service contracting and inherently governmental
functions. This policy letter defined an "inherently governmental
function" as a "function that is so intimately related to
the public interest as to mandate performance by Government employees."

While this
Act specifies that Government employees are solely to be responsible
for the final plan or report, this does not limit agencies from being
assisted by non-Federal parties, such as contractors or grantees, in
the preparation of these plans and reports. This might be necessitated,
for example, when there is a lack of in-house expertise within an agency.
The assistance of non-Federal parties may include collection of information,
the conduct of studies, analyses, or evaluations, or the providing
of advice, opinions, or ideas to Federal officials, or to provide training
of Federal employees. This assistance by non-Federal parties in the
performance of inherently governmental functions is also consistent
with the OMB policy letter.

The Committee
also recognizes that many Federal programs are carried out by States,
local governments, and contractors-not by the Federal Government directly.
Federal agencies regularly rely on these parties for performance data,
and the Committee neither intends nor expects existing systems, processes,
and requirements for measuring current or past performance, or which
propose or forecast future performance levels to be duplicated by new
parallel efforts involving only Federal employees.

Finally,
the Committee notes that it is the longstanding policy of the Federal
Government that Federal officials should perform the decision and/or
policymaking and managerial responsibilities of the government. The
basic principle is that accountable federal employees should not only
be responsible for the "products" produced by their agencies
(whether contractors or federal employees produced the product) but
also should be involved in a significant manner in the "process"
of formulating the product. Thus, agencies are not fulfilling the intent
of this legislation if the required plans and reports are largely the
products of contractors. To further this need for accountability, agencies
should include in their plans and reports an acknowledgment of the role
and a description of a significant contribution made by a contractor
or other non- federal entity to the plan or report.

The legislation
includes all federal entities defined by 5 U.S.C. 105 as being an agency,
with certain exceptions. The Panama Canal Commission was excluded because
its substantive missions will end within a few years. The Central Intelligence
Agency is excluded because the Budget of the United States Government
displays a very limited number of program activities for this agency.
The Committee also recognizes that plans and reports prepared by the
Central Intelligence Agency would most likely be classified in their
entirety. The Director of OMB should assess whether, at some future
date, the CIA should be made subject to this Act, and include the results
of that assessment in the report to the President and the Congress
required by Section 1118(c). This assessment should also review how
those defense agencies whose primary mission is intelligence should
be subject to this Act. In preparing this assessment, the cognizant
Congressional committees, the Secretary of Defense, and the heads of
the agencies should be consulted. Also excluded are the Postal Rate
Commission and the General Accounting Office. The Postal Service is
covered by this Act, but under a special provision (Section 7) designed
to recognize its special status of independence within the Federal
Government.

This section
requires the preparation of an agency's annual performance plan and
the Federal Government performance plan for the overall budget. The
latter plan is to be submitted to Congress as part of the Budget of
the United States Government. Agency annual plans are submitted to
OMB for use in preparing the overall government-wide performance plan.

Beginning
with the submission for FY 1999, the annual budget of the United States
Government shall include a Federal Government performance plan. The
Director of OMB has discretion in determining the best manner and useful
form for submitting the performance plan. The plan could be integrated
with the detailed budget estimates, appear as an individual part of
the main budget document, or be submitted separately. The Committee
intends that this plan be submitted coincident with the principal budget
documents, so that Congress will have this plan available when reviewing
the agency budget estimates.

The Act
does not set dates for submission of the annual agency performance
plans to OMB. The Committee expects OMB to establish agency submission
dates commensurate with the time it requires for preparing the overall
government-wide plan.

The Committee
intends that the Federal Government plan present a single cohesive
picture of the annual performance goals for the fiscal year. In doing
so, the Director may summarize or abstract the material contained in
an agency's annual performance plan, presenting at least the key measures
of program performance. Waivers of requirements and controls as provided
for by Section 5 of this Act must be included.

Several
Federal agencies, such as the Tennessee Valley Authority, have statutorily
been afforded a greater degree of autonomy in conducting and administering
their business operations than have other agencies. The requirements
of this Act that Executive agencies submit strategic plans and annual
performance plans to OMB is not meant to diminish such autonomy. Rather,
this is simply a reflection of the requirement placed on OMB to develop
annually a Federal Government performance plan, based on the agencies'
performance plans. In preparing the Federal Government performance
plan, the Committee expects OMB to make allowances, as appropriate,
for the greater degree of autonomy of TVA and similar agencies. This
legislation is not intended to alter in any way the statutory authority
of TVA or any other agency to plan or conduct its operations. Moreover,
as the Committee has stressed, performance measurement under this Act
should focus on those measures and that information useful to and used
by program managers. Such an emphasis very much relies on a bottom-up
approach, rather than top-down imposition. This premise is particularly
valid for those agencies with significant autonomy for their business
operations.

To obtain
a comprehensive picture of the government's performance, the Committee
believes it important to take tax expenditures in consideration. Tax
expenditures are revenues foregone, and are specified in the tax code.
They represent preferential exceptions to the baseline provisions of
the tax structure and are created to provide benefits to qualifying
individuals or entities, or to provide an incentive to encourage particular
activities. Tax expenditures are similar to spending programs in their
impact on the deficit; and like spending, are established to achieve
specific national objectives. However, the effect of tax expenditures
in achieving these goals is rarely studied.

To increase
significantly the oversight and analysis of tax expenditures, the Committee
believes that the annual overall Federal Government performance plans
should include a schedule for periodically assessing the effects of
specific tax expenditures in achieving performance goals. (This schedule
would be in addition to the primary content of the overall plan-the
program performance goals tied to the direct expenditure of funds.)
The Committee expects that annual performance reports would subsequently
be used to report on these tax expenditure assessments. These assessments
should consider the relationship and interactions between spending
programs and related tax expenditures. The Committee hopes that such
reports will foster a greater sense of responsibility for tax expenditures
with a direct bearing on substantial missions and goals.

The Committee
also expects the Director of OMB to establish an appropriate framework
for undertaking periodic analyses of the effects of tax expenditures
in achieving performance goals, and to describe this framework in the
May 1, 1997 report to the President and the Congress. In establishing
the framework, the Committee encourages the Director to consult with
the Secretary of the Treasury, the General Accounting Office, and the
Joint Committee on Taxation.

The principal
parts of agency annual performance plans shall include a set of performance
goals for the agency's program activities along with a summary of the
necessary resources, the performance indicators that will be used to
measure performance, and an identification of how the measured values
will be verified. Additionally, the annual agency plans shall contain
any proposed waivers of administrative and procedural requirements
as provided for by section 5.

Each plan
as submitted to OMB should be consistent with the agency's budget request.
The agency should then consult with OMB in revising that plan to be
consistent with the President's proposed Budget of the United States
Government.

After publication
of the government-wide performance plan, agencies should provide copies
of their final plans to their authorization and appropriation committees
in the Congress, and make such plans available to the public.

The Committee
recognizes that Congressional actions on agency funding requests could
materially affect achievement of the goals established in an annual
performance plan. The Committee prefers that agencies address in their
annual performance reports any significant effects on the achievement
of performance goals resulting from Congressional action. However,
an agency may also elect to revise its annual performance plan to reflect
Congressional budget action. Any revised plan should be completed prior
to the start of the fiscal years for which it will be in effect.

A copy
of the revised plan should be provided to OMB, the appropriate Congressional
authorizing and appropriation committees, and made available to the
public. No revisions should be made to the Federal Government performance
plan for the overall budget required by section 1105(a)(29). If an
agency prepares a revised annual performance plan, the program performance
report should compare the actual performance achieved against both
the performance goals in the revised plan and the performance goals
as set forth in the Federal Government performance plan for the overall
budget.

Annual
performance goals are the major means for gauging progress toward accomplishment
of the longer-term general goals contained in the strategic plan. The
Act specifies that most performance goals are to be expressed in an
objective, quantifiable, and measurable form. It is important that
a performance goal be defined with sufficient precision to permit ready
assessment of progress in meeting that goal. There may be several performance
goals for any general goal in a strategic plan.

The performance
goals should conform with the level of resources requested for the
relevant program activities in the Budget of the United States Government.
Agencies are expected to make appropriate adjustments to the annual
plans originally submitted to OMB in order to reflect the staffing
and funding levels in the budget.

For most
performance goals, a number of performance indicators should be developed.
Performance indicators are the reference markers used to measure whether
a goal is being achieved. For example, a performance goal for the Indian
Health Service might be to improve maternal and child health on tribal
reservations. To measure this improvement, a number of indicators might
be used, such as morbidity and mortality rates, median infant birth
weights, immunization coverage percentages, frequency of pediatric
checkups, etc. In some instances, the performance goal may be self-measuring
and no separate indicators are needed. For example, a performance goal
calling for the Federal Aviation Administration to staff 300 airport
control towers on a 24 hour basis would be self-measuring.

The Committee
believes agencies should develop a range of related performance indicators,
such as quantity, quality, timeliness, cost, and outcome. A range is
important because most program activities require managers to balance
their priorities among several subgoals. For example, the farm loan
program's goal may be to provide farmers with a source of credit if
they cannot get it from the private sector (intended outcome). A manager
of a farm loan program will want to make the most loans possible (quantity),
ensure the loan will be repaid (quality), provide the loan when it
is needed (timeliness), and at the least cost to the government (cost).
Reliance on any single one of these measures could create a perverse
incentive for managers to achieve one subgoal at the expense of the
others. While the Committee believes that a range of measures are important
for program management and should be included in agency performance
plans, it also believes measures of program outcomes, not outputs,
are the key set of measures that should be reported to OMB and Congress.

Wherever
possible, agencies should include performance indicators that correlate
the level of program activity with program costs, such as costs per
unit of result, costs per unit of service, or costs per unit of output.
The Committee acknowledges that such indicators require a financial
system capable of assigning and aggregating costs by unit, and a clear
and precise definition of the unit that will be measured. Many agencies
are developing the capability to report on unit cost measures in the
annual financial statements required by the Chief Financial Officers
Act of 1990. It is important, however, that the indicators of unit
cost be those most useful to agency staff in managing programs, rather
than being simply those indicators primarily developed for financial
management. The Committee expects agencies to assign a high priority
to the development of these types of unit cost indicators.

In verifying
and validating the measured values, an agency may use an audit or any
other procedure that would support the general accuracy and reliability
of information contained in the annual performance report. To the extent
that the annual performance report contains audited performance information
that is also included in the annual financial statements required by
the CFOs Act, no further validation of such information is required.
Agencies should note that the use of audits is not required for performance
data contained in reports under the Government Performance and Results
Act. But, again, the Committee emphasizes that as the success of the
Act depends to a large degree on the reliability and utility of the
information presented, special attention will be needed to ensure credibility.
This will require efforts by all parties at all stages-agency data
collection, OMB guidance and supervision, and Congressional and GAO
oversight.

The Committee
recognizes that not all of the many diverse program activities conducted
by the Federal Government are susceptible to objective and quantifiable
measurement. To be useful, performance measurement must be relevant,
and reflective of the primary focus of the agency. Agencies should
not trivialize measurement by seeking to measure performance in a forced
or artificial way, simply to present a quantifiable measure.

In areas
where meaningful objective measurement is difficult, an alternative
form of measurement may be authorized by OMB. Preferably, the alternative
will be in the form of two, somewhat subjective performance definitions-one
of a minimally or marginally effective program, and one of a fully
successful program. Recognizing that in some cases an agency may be
unable to define a goal using these two descriptive statements, OMB
may in those instances authorize the agency to define and use another
alternative form. All forms must be in terms that would permit an independent
determination of whether the program's eventual performance corresponded
to the performance statement.

The Committee
also recognizes that for a very small number of program activities,
it may be infeasible or impractical to set performance goals in any
form. For these program activities, OMB may authorize a brief explanation
in the annual performance plan of why this is the case.

The activity
structure in the Budget of the United States Government is not consistent
across various programs, being tailored to individual accounts. This
lack of uniformity results in-for purposes of this Act-too many program
listings for some accounts, and an overly broad aggregation for others.
A single account may contain ten or more projects or activities. The
Committee intends that the annual plans not be voluminous presentations
describing performance at every level for every program activity. The
annual plans and reports are to inform, not overwhelm the reader. The
agencies are expected to use good judgment in determining the array
of program activities presented in the plan, and to consolidate, aggregate,
or disaggregate the lists of program activities appearing in the budget
accounts.

Though
the annual report will be the most public and visible presentation
of performance data, the Committee expects that it will not be the
only such presentation that an agency will make. Performance information
will be useful at many different levels in the Federal government,
from line managers to policymakers, each of which will need information
presented at different levels of detail and frequency. Agencies should
account for these varying uses of and needs for information in designing
their performance measurement systems.

The Committee
recognizes that for certain government functions and operations, many
key performance goals and indicators should not be publicly revealed.
Publishing them could, for example, compromise national defense or
undercut negotiating strategy with other countries. The Act allows
an agency to prepare a classified or non-public annex to its annual
performance plan covering program activities that relate to national
security, the conduct of foreign affairs, criminal prosecution, or
revenue collection. The parameters set out in the Freedom of Information
Act may be useful to agencies in determining whether material belongs
in such an annex. An agency preparing a classified non-public annex
is expected to minimize the number of performance goals and indicators
contained therein.

The Act
does not provide for a similar classified or non-public annex to the
strategic plan. The Committee believes that general goals can be defined
in a way that avoids the need for classified goals. Should this presumption
prove incorrect, or if those general goals become so imprecise as to
be virtually useless, this should be addressed in the reports required
by sections 6(a) and 8(b) of this Act, and in the strategic plan(s)
for the agency. The Committee believes, in the interests of public
disclosure and accountability, that an agency should indicate in its
strategic plan whether it will have a classified annex to the annual
performance plan.

An
"outcome measure" assesses the actual results, effects, or
impact of a program activity compared to its intended purpose. Outcome
measurement cannot be done until a program or project reaches either
a point of maturity (usually at least several years of full operation
for programs continuing indefinitely) or at completion. Another prerequisite
for measuring outcomes is the existence at the outset (in statute, directive,
or other document) of a clear definition of what results are expected
from the program or project. While recognizing that outcome measurement
is often difficult, and is infeasible for some program activities, the
Committee views outcome measures as the most important and desirable
measures, because they gauge the ultimate success of government activities.

An
"output measure" records the actual level of activity or effort
that was realized, and can be expressed in a quantitative or qualitative
manner. Output measures are often intermediate, in that they assess how
well a program or operation is being carried out during a particular
time period, such as a quarter or a year. The number of schools and students
participating in a national test of reading skills, and the percentage
of eligible students receiving additional reading instruction, might
be output measures, while improved national reading scores might be an
outcome. Output measures in the annual performance plans should emphasize
those used by agency officials in day-to-day operations and program management.

A
"performance goal" is the target level of performance (either
output or outcome) expressed as a tangible, measurable objective, against
which actual achievement will be compared. An example of a performance
goal for a student reading program would be to have 2.3 million students
receive an average of three additional hours of reading instruction per
week during the 1990 school year.

A
"performance indicator" is a specific value or characteristic
used to measure output or outcome. In other words, it is what will be
measured. Quantitative indicators are used in measuring work-load, production,
transactions, records, and various rates, such as utilization, consumption,
and frequency. Qualitative indicators are used to measure timeliness,
stoppage or out-of-service conditions, and various rates such as error
or defect rates, inventory fill, and maintenance or repair intervals.
Quality of service indicators include measures of complaints, customer
satisfaction levels, and responsiveness rates. Efficiency indicators
measure relative transaction or production costs. Financial indicators
are numerous and can include receipt, collection, and credit obligation
rates. Other examples of indicators include milestone and activity schedules,
design specifications (such as hardware performance levels), operating
parameters (such as mean failure rates), status of conditions (such as
highway miles in good repair), and percentage coverage (such as eligible
population).

The term "program
activity" refers to the listings of projects and activities in
the appendix portion of the Budget of the United States Government.
That appendix contains one or more program and financing schedules
for each agency, one part of which is the "Program by activities"
section.

"Program
evaluation" is an objective and formal assessment of the results,
impact, or effects of a program or policy. While most often aimed at
assessing the degree to which a program's stated objectives are being
or have been realized, program evaluations are also frequently used
for measurement of "unintended" results, good or bad, that
were not explicitly included in the original statement of objectives
or foreseen in the implementation design. Thus, they can serve to validate
or find error in the basic purposes and premises that underlay a program
or policy. Finally, this definition should be read as including evaluations
of program implementation process and operating policies and practices
when the primary concern is about these issues rather than program
outcome. However, the definition is not intended to include program
monitoring activities that are (or should be) a routine component of
good program management.

Beginning
with FY 1999, the head of each agency shall prepare and submit to the
President and Congress a report on program performance. The first of
these annual reports is to be submitted no later than March 31, 2000.
These reports will contain two main parts: a report on the actual performance
achieved compared to the performance goals expressed in the performance
goals plan; and of the steps to be taken to achieve those goals that
were not met. If a performance goal becomes impractical or infeasible
to achieve, the agency should explain why that is the case and what
legislative, regulatory, or other actions are needed to accomplish
the goal, or whether the goal ought to be modified.

The agency's
performance report must be submitted to the appropriate authorization
and appropriations committees of the Congress, and copies provided
other committees and to the public upon request. The agency shall also
provide to any committee of Congress, upon request, more specific information
on the actual performance for any performance indicator established
in its annual performance plan. Agencies are required to begin reporting
performance trends, on a phased-in basis, so that for FY 2002 and thereafter,
performance data will be shown for each of the most recent four years.

A performance
report shall also describe the use and assess the effectiveness of
any waiver of administrative requirements and controls as provided
under Section 5, and summarize the findings of those program evaluations
completed during the year covered by the report. If the agency has
prepared a classified or non-public annex to its annual performance
plan, then those same items shall be covered in a classified or non-public
annex to the performance report.

The Committee
recognizes that in some cases not all of the performance data will
be available in time for the March 31 reporting date. In that situation,
the Committee expects that the reporting entity will provide whatever
data is available, with notation as to its incomplete status. The Committee
anticipates that the preliminary figures will be updated as part of
the trend information in future annual reports.

Many agencies
are currently developing systems for measuring performance to provide
financial and program information for the audited financial statements
required by the CFOs Act. The CFOs Act is a product of this Committee.
The linking of program performance information with financial information
is both a key feature of sound management, and an important element
in presenting to the public a useful and informative perspective on
Federal spending. In this regard, the Committee expects that agencies
will continue to present program performance data in their audited
financial statements.

The Committee
also anticipates that substantial differences could potentially exist
between the content of financial statements and of program performance
reports, particularly with respect to program coverage. Nonetheless,
during the period before the first program performance report is required
on March 31, 2000, the Committee encourages agencies to examine the
potential use of audited financial statements for reporting program
performance under this Act.

The March
31 reporting date coincides with the date that agencies are to submit
their annual financial statements to OMB under the CFOs Act (31 U.S.C.
3515). The Government Performance and Results Act allows both submissions
to be combined, at the agency's option.

The Director
of OMB is authorized, though not required, to exempt any agency with
annual outlays of $20 million or less from having to prepare strategic
plans, annual performance plans, and program performance reports-a
level the Committee concluded would ensure that virtually all major
program and regulating agencies were covered by the Act. In the report
mandated by Section 6(a), the Director of OMB may discuss whether a
higher amount or some progressive annual adjustment to the amount,
is appropriate. Such exemptions are not permanent, and may be modified
or repealed at the discretion of the Director.

This section
of the Act allows agencies to propose, and OMB to approve, waivers
of certain non-statutory administrative procedural requirements and
controls in return for specific individual or organizational accountability
to achieve a higher performance goal. An example of increased flexibility
would be to allow an organization to recapture unspent operating funds
because of increased efficiencies, and then to use these funds to purchase
new equipment or expand employee training. Another example might involve
delegating more authority to line managers to make procurement decisions.

These waivers
can include specification of personnel staffing levels, limitations
on compensation or remuneration, and prohibitions or restrictions on
funding transfers among budget object classification 20 (contractual
services and supplies, including travel and transportation of persons
and things, rental payments to GSA and others, communications, utilities,
and miscellaneous charges), and subclassifications 11 (personnel compensation),
12 (personnel benefits), 31 (equipment), and 32 (land and structures).
Such proposed waivers are to be reviewed by OMB and are subject to
its approval, as well as by the originating agency. For example, requirements
dealing with personnel matters that were issued by the Office of Personnel
Management would also require OPM approval for waiver. The Committee
urges the originating agencies to make every reasonable effort to be
supportive of such managerial flexibility waivers, particularly on
a pilot project basis.

Agencies
are not authorized through a waiver under this Act to transfer funds
budgeted for the following subclassifications: 13 (benefits for former
personnel), 33 (investments and loans), 41 (grants, subsidies, and
contributions), 42 (insurance claims and indemnities), 43 (interest
and dividends), and 44 (refunds). An agency may not use a waiver to
transfer funds from one program activity to another program activity
unless it has received authority, other than under this Act, to do
so.

The Committee
emphasizes that agencies are not authorized to propose a waiver of
a requirement or control established in law. However, if an agency
has authority under a law other than this Act to waive a statutory
requirement or control, it may do so and need satisfy only the requirements
of that law. This section also does not convey any authority for a
Government manager or official to waive unilaterally the terms or provisions
of any contract, collective bargaining agreement, or other legal instrument
that is in effect. Additionally, this Act does not authorize waiver
of any regulation promulgated under 5 U.S.C. 553, without appropriate
notice and comment, unless the rule already provides authority for
such waivers.

Proposed
waivers shall describe in quantifiable terms the anticipated efforts
on performance resulting from greater managerial or organizational
flexibility, and compare that to the current level of performance and
the projected performance that would otherwise occur. Also assessed
should be the extent that expected improvements will be sustained over
future years. Waivers of limitations on compensation or remuneration
shall precisely state the monetary change in amounts that will result
from meeting, exceeding, or failing to meet the performance goals,
and identify by organizational placement or title the individuals covered.
Also described shall be the potential adverse effects on compensation
where performance goals are not met, particularly where the waiver
could result in a substantial increase in compensation if the goal
is met or exceeded and the actual performance fails even to maintain
previous levels.

The annual
performance report is to include a description on the use and effectiveness
of any waiver in achieving a performance goal. This description should
also identify the individual or organizational consequences resulting
from a failure to maintain the previous level of performance as a result
of using the waiver. This latter information would supplement that
portion of the annual performance report that addresses the reasons
why a performance goal was not achieved, and the plans and actions
that will be taken to achieve the goal.

The Committee
believes that no manager should be confident that a proposed waiver
will improve performance if employees are unhappy with or opposed to
the effects that the waiver would have on them or their jobs. The Committee
is convinced that employee participation, including participation by
employee representatives, in the development of proposed waivers is
critical-if the employees are not supportive, then the chance for failure
will be high. Agencies are strongly encouraged to involve employees
when developing proposed waivers, and to regularly seek employee views
and suggestions. Performance improvement is not the exclusive responsibility
of the manager, and should be viewed as a shared enterprise by managers
and staff working together as partners.

Proposed
waivers are to be included in the Federal Government performance plan
for the overall budget as required by section 1105(a)(29). This will
give general notice about the specifics of any waiver approximately
eight months before it would go into effect.

An agency
may withdraw a proposed waiver prior to the beginning of the fiscal
year it would go into effect. If an agency suspends or ends prematurely
a waiver during the fiscal year, the agency should briefly explain
its reasons for doing so in its annual program performance report for
that fiscal year.

After a
waiver has been in effect for three years, an agency may propose that
a waiver, other than one on limitations on compensation or remuneration,
be made permanent. Approval shall be noted in the subsequent annual
Federal Government performance plan and in each of the agency's annual
performance plans. Such a permanent waiver may be rescinded by OMB
should changed circumstances or policies warrant.

The Committee
encourages agencies to be creative and entrepreneurial in developing
and applying managerial flexibility waivers. The successful experience
of other national governments and certain state and local governments,
in providing much greater authority to managers and staff in administering
and implementing programs, suggests that substantial improvements in
performance can result. A limited or constrained approach to waivers
is unlikely to lead to much improvement in performance.

The Committee
has emphasized that this Act does not authorize waiver of any requirement
or control established by law. The Committee recognizes that this may
inhibit the establishment of improved performance levels. However,
neither the Committee nor the agencies are able at this time to identify
in a complete way those specific statutory requirements and controls
for which a waiver should be considered.

The Director
of OMB is encouraged to include in the May 1, 1997 report required
by Section 6(a), a list of statutory requirements for which Congress,
in future legislation, should consider authorizing waivers. This list
should describe the performance-related benefits of such waivers, as
well as other effects or consequences.

The Committee
also emphasizes that these waivers are intended to improve program
results. Should they be used for other purposes, or in an inappropriate
way to avoid lawful requirements or responsibilities, this Committee
will act quickly to end this provision.

Because
the Committee believes that immediate and governmentwide implementation
of this Act is neither feasible nor desirable, implementation begins
with a set of pilot projects, before proceeding government-wide in
the Fall of 1997.

The pilot
projects in the preparation of program performance plans and reports
shall be in at least ten agencies, will run for three years (FY 1994,
1995, and 1996), and will cover one or more of the major functions
and operations of each pilot agency. The agencies are to be designated
by the Director of OMB after consultation with the head of each agency.
In total, the selected pilot projects are to reflect a representative
range of Federal functions.

The Committee
strongly believes that useful indicators and goals cannot be identified
without defining a program's mission and long-term general goals, as
covered in a strategic plan. However, strategic planning is a lengthy
process which, if required for all three years of the pilot projects,
could impede the initial work of experimenting with performance indicators
and goals. Therefore, the legislation requires that a strategic plan
be used in only one of the three years of the pilot projects, and the
plan need not conform with all the specifications in section 3. The
Committee nonetheless expects agencies to make a substantive effort
to identify the mission, general goals, and objectives of programs
covered under the pilot projects even in those years for which preparation
of a strategic plan is foregone.

The Director
of OMB is required to report to the President and the Congress on the
results of the pilot projects, no later than May 1, 1997. This report
shall include an assessment of the benefits, costs, and usefulness
of the plans and reports in meeting the purposes of the Government
Performance and Results Act, and should include any recommended changes
in the Act's provisions. It should identify any significant difficulties
experienced by the pilot agencies in preparing the plans and reports.
The Committee strongly encourages the Director to report on such problems,
on an interim basis, as early as possible, if the difficulties are
severe enough that further implementation of the Act should be reviewed
and potentially deferred or amended. Early notice of major problems
will allow time for corrective legislative action to be taken.

The second
set of pilot projects are to test increased managerial flexibility,
through the use of waivers of certain administrative procedural requirements
and controls-in return for greater management accountability for performance.
Each such pilot project shall run for two years (FY 1995 and 1996),
and shall be selected from among the set of pilot projects in performance
plans and reports. The May 1, 1997 report of the Director of OMB required
by Section 6(a) shall include an assessment of the pilot projects in
waivers for managerial accountability and flexibility.

The sequence
for proposing and considering pilot projects for managerial flexibility
during fiscal years 1995 and 1996 is abbreviated from what will occur
beginning with fiscal year 1999. Because proposed waivers under the
pilot projects will not be included as a part of the Government Budget,
pilot project agencies are to provide for appropriate and timely notification
to and consultation with parties prospectively affected by a proposed
waiver. This notification and consultation shall occur prior to the
proposed waiver being sent to OMB for review and approval.

The third
set of pilot projects covers performance budgeting which presents varying
levels of performance that would result from different budgeted amounts.
The following example illustrates how performance budgeting could affect
two performance measures (efficiency and accuracy). In a hypothetical
program, it currently costs $1.30 to process a payment, with a payment
accuracy rate of 99.5 percent. Studies have shown that spending $1.10
to process each payment will lower the accuracy rate to 97 percent,
while increasing the processing to $1.50 will raise the accuracy rate
to 99.9 percent. Using a performance budgeting approach, funding could
be increased or decreased to a level that equated to an acceptable
performance level.

Pilot agencies
and OMB are also encouraged to test an alternate form of a performance
budget, although this is not specifically required to be part of the
pilots. Under this test, the budgeted amount would not change, but
various performance values could be shifted to reflect changes in priority
or emphasis. Using again the above hypothetical program, the payment
processing cost of $1.30 is sufficient to achieve a 99.5 percent accuracy
rate and to disburse the payment within 21 days of claim receipt. Studies
have shown that for the same cost, the time interval can be reduced
to 16 days while achieving an accuracy rate of 98.5 percent. The choice
is whether to accept lower accuracy in return for quicker payments.

There shall
be at least five agencies participating in performance budgeting pilot
projects, designated by the Director of OMB in consultation with agency
heads, and covering FY 1998 and 1999. The Committee chose to phase
these pilot projects so that they would begin only after agencies had
sufficient experience in preparing strategic and performance plans,
and several years of collecting performance data. For the second year
of these pilot projects (FY 1999), the Act requires that the Budget
of the United States include as an alternative budget presentation
the performance budgets of the designated pilot agencies.

The Director
of OMB is to report to the President and the Congress no later than
March 31, 2001, on the results of the performance budgeting pilot projects,
on the feasibility of including a performance budget as part of the
annual Budget of the United States Government, and on any recommended
changes in the requirements of the Government Performance and Results
Act. As this Act contains no provision authorizing or implementing
a performance budget (other than as a pilot project), the report is
to include a recommendation on whether there should be such legislation
and if so, its general provisions.

This section
deals specifically with the Postal Service. The Committee intends that
the development of strategic plans, annual performance plans, and annual
performance reports, which the Act requires of Federal agencies generally,
should also be required of the Postal Service. However, because of
its unique statutory mission and its independence from the Federal
budget and appropriations processes, a separate set of provisions has
been developed for application to the Postal Service. These provisions
in large measure parallel those of the rest of the Act, but have been
tailored where appropriate to reflect that agency's special circumstances.

The Postal
Service currently has in effect a strategic plan for the years 1990-1995.
The plan contains a mission statement, general goals, a description
of underlying assumptions, and statistics concerning the economic outlook.
The Committee expects that the strategic plan produced subject to this
legislation may be similar to what the Postal Service already produces,
while reflecting the additional requirements of this Act.

The three-year
update of the strategic plan called for in this section should contain
any updates or changes to the overall goals or objectives, and any
significant change in approaches or in external factors significant
to postal operations.

The term "program
activity" as used in this section has a different meaning than
as used in section 4, in order to reflect the distinct nature of postal
operations. Because postal operations are financially independent and
self-supporting, the term is used here to describe
"a specific activity related to the mission of the Postal Service",
and does not relate to programs or activities listed in the Federal budget.

The Committee
does not expect the Postal Service to recreate the efforts of the planning
process already in place. Nor does it expect that significant additional
resources will need to be added to those currently devoted to the strategic
planning process in order to comply with the Act's requirements for
annual performance plans and reports. Both the performance plans and
the performance reports shall be included in the annual comprehensive
statement required by section 2401(g) of Title 39. This statement may
be similar to the current annual statement, while reflecting the additional
requirements of this Act.

The Postal
Service will submit its first strategic plan under this Act to Congress
and the President no later than September 30, 1997. Its first annual
performance plan shall be due beginning with FY 1999. In developing
its strategic plan, the Postal Service shall advise the appropriate
committees of Congress of the plan's prospective contents, and shall
solicit and consider the views of other interested parties. The Committee
recognizes that the Postal Service already provides substantial avenues
for such input in regular meetings with groups of major mailers and
other postal customers, and urges that there also be established and
published a name and address for the receipt of suggestions and comments
from the general public.

This section
states that nothing in this Act shall be construed as limiting the
ability of Congress to establish, amend, suspend, or annul a performance
goal. Any such action shall have the effect of superceding that goal
in the Federal Government performance plan for the overall budget.

The Comptroller
General is required to submit a report to Congress not later than June
1, 1997 (about a month after the OMB report) on the implementation
of this Act, including the prospects for compliance by agencies beyond
those participating in the pilot projects.

This section
requires the Office of Personnel Management to consult with the Director
of OMB and the Comptroller General, to develop management training
programs and orientations covering strategic planning and program performance
measurement. The Committee encourages OPM to draw on, where appropriate,
the expertise of individuals and organizations outside the Federal
Government who have had considerable involvement in governmental performance
measurement, such as the National Academy of Public Administration.

This section
makes clear that no provision of the Act is intended to confer upon
any private person any substantive or procedural right or benefit,
enforceable at law, against any agency or office of the United States.

Pursuant
to the requirements of paragraph 11(b) of rule XXVI of the Standing
Rules of the Senate, the Committee has considered the regulatory impact
of S. 20. The legislation is designed to improve the internal operations
of the Federal government by enhancing program performance and accountability
and will have no adverse impact on the public:

(1) Regulatory
Impact-The legislation will impose no regulations on individuals, consumers,
or businesses;

(2) Economic
Impact-The legislation will have no economic impact on individuals,
consumers, or businesses;

(3) Privacy
Impact-The legislation will have no privacy impact on individuals,
consumers, or businesses; and

Dear Mr.
Chairman: The Congressional Budget Office has reviewed S. 20, the Government
Performance and Results Act of 1993, as ordered reported by the Senate
Committee on Governmental Affairs on March 24, 1993. S. 20 would establish
a system for performance management in government agencies, beginning
with pilot projects in 10 agencies. The bill would require federal
agencies to develop long-term strategic plans and annual performance
plans, and to measure how well they achieve the plans' objectives.

CBO estimates
that implementation of S. 20 would cost between $5 million and $10
million annually for fiscal years 1994 and 1995. Estimating the cost
after 1995 is more difficult. We estimate that implementing the bill
would cost at least $50 million annually in fiscal years 1996-1998,
and more than that in subsequent years. The cost could be in the hundreds
of millions of dollars per year if the executive branch ambitiously
pursues performance management. Over the long term, the procedures
required by S. 20 could save money by leading to more effective management
of government agencies.

Expenses
for implementing S. 20 would be paid from appropriated funds and would
not affect direct spending or receipts. Therefore, pay-as-you-go procedures
would not apply.

PILOT
PROJECTS

The Office
of Management and Budget (OMB) would select 10 agencies to conduct
pilot projects in performance management over the 1994-1996 period.

Additional
pilot projects in specific aspects of performance management would
be conducted through 1999. OMB indicates that, in developing the pilot
projects, it would select agencies that already have a strategic plan
and are already collecting data on the performance of their programs.
Based on experience with performance measurement to date, largely from
implementing the Chief Financial Officers Act of 1990, we expect that
each pilot agency might use 5 to 10 employees annually to set goals
and report on performance. Based on this level of effort, CBO estimates
that the cost of the pilot projects would range from $5 million to
$10 million annually over the 1994-1996 period. Such costs would be
paid from appropriated funds.

GOVERNMENTWIDE
PROGRAM

The bill
would require all government agencies to prepare long-term strategic
plans beginning in fiscal year 1997 and annual performance plans beginning
in fiscal year 1998. Agencies would probably begin developing strategic
plans several years before they are due; therefore, CBO estimates that
the cost of implementing S. 20 governmentwide would begin in fiscal
year 1995 or 1996.

For a number
of reasons, however, CBO does not currently have a reliable basis for
estimating the cost of a governmentwide effort.

First,
it is difficult to predict how extensively agencies would embrace performance
management. Would agencies base their entire management scheme on performance
measures, or would they make the minimal effort needed to comply with
the bill, changing the way they do business very little? The costs
of the bill would depend on how much emphasis this and future Administrations
would place on the program and how committed agencies would be, neither
of which we can predict with confidence.

Second,
federal and other governmental agencies that have undertaken performance
management programs have not been able to provide us with much information
about the incremental costs of such efforts. Incremental costs are
difficult to identify because performance management becomes an integral
part of an agency's management systems.

Third,
such costs could vary greatly from agency to agency, depending on the
nature of the agency's tasks and on the extent to which each agency
is already engaged in strategic planning and performance measurement.

Finally,
long-term costs would vary with the performance measures that would
be selected and the extent to which funding would be available to select
and verify performance measurement data.

Extrapolating
from the low end of the estimate for pilot projects indicates that
a meaningful effort to expand performance management governmentwide
would cost at least $50 million annually. Most of these initial costs
would be for developing strategic plans and performance plans. In later
years, costs would be incurred for collecting data to measure performance
and to verify the validity of such data. These costs could reach hundreds
of millions of dollars annually.

POSTAL
SERVICE MANAGEMENT

The bill
also would require the Postal Service to implement performance management
in much the same way as federal agencies, except that the Postal Service
would present the required annual performance plans and reports as
part of its annual comprehensive statement rather than submitting the
plans and reports to OMB and the Congress. We estimate that the Postal
Service would not incur significant costs to implement the provisions
of S. 20 because it is already doing much of what the bill would require.

Enactment
of S. 20 would not affect the budgets of state or local governments.

If you
wish further details on this estimate, we will be pleased to provide
them. The CBO staff contact is Mickey Buhl.

I strongly
support S. 20 as reported by the Committee. It addresses an area of
vital importance, and does so in a way that should significantly improve
the efficiency, effectiveness, and accountability of Federal programs.
Its mandate for a new focus on program results is a major and fundamental
reform of government activities, and a vast improvement over existing
practices.

Nonetheless,
I believe the legislation would benefit from an additional provision.
Under the legislation as reported, Federal agencies would be required
to develop measurable performance goals for their programs. I believe
we should go one step further, and also require that Congress itself
play a direct role in the establishing of at least some of those goals.
Congress creates and funds the programs, so it ought to give some indication
as to what it expects them to accomplish.

This is
not micro-management; in fact, it is just the opposite. Determining
what results a program should achieve is the essence of policymaking.
It is what really guides a program's direction. But Congress rarely
does that, so it falls upon the program managers to determine the objectives.
Then Congress will often try to steer a program's direction by interceding
in its day-to-day operations-which is micro-management. What we end
up with is the managers trying to set policy, and the policymakers
trying to manage-not a prescription for good government.

If, on
the other hand, Congress specified a few specific goals in its authorization
and appropriation legislation, agencies could then develop a more detailed
hierarchy of goals-all aimed at eventually achieving the Congressional
objectives.

At a May
9, 1991, hearing on how to improve Congressional oversight held by
the House Ways and Means Committee, former Carter Administration OMB
Director James T. McIntyre recommended that,

To facilitate
the oversight process, standards to measure each program should be
included in its authorization or reauthorization. The Congressional
Budget Act should be amended to require this. The standards should
be in quantitative terms. Even qualitative goals should be specified
quantitatively. The standards should be part of the legislation itself,
not conference report language. The conference report on all reauthorizations
should explain how the program's performance compares to the goals
set.

The need
for Congress itself to set programs goals is clearly one of the major
lessons of the recent HUD scandals. After looking at those problems
in 1990, the Congressional Oversight Panel of the National Academy
of Public Administration strongly recommended that,

Congress
should set performance goals * * * that provide a better match between
those goals and the resources likely to be available for implementation.
* * * Congress should * * * provid[e] in authorizing statutes criteria
by which to measure program effectiveness.

In May
1990, the Senate Banking Committee's HUD/MOD Rehab Investigation Subcommittee
held hearings on the abuses at HUD. That subcommittee received testimony
from several expert witness who emphasized the need for congressional
program performance goals in order to prevent future scandals:

Within
the agencies, people will want to know what is it that Congress defines
as the indicators for how well a program is doing.

Bert Rockman,
Brookings Institution.

Quite frankly,
sometimes the Congress does not want to really clarify what the indicators
are, either. It is easier to keep it somewhat confused. That creates
additional problems for the agency.

Preventing
more HUDs ultimately is a continuous process of improving program goals
in law and testing agency performance against them * * *

Richard
A. Wegman, National Academy of Public Administration.

And most
recently, at our own Committee's March 11, 1993 hearing on S. 20, the
Government Performance and Results Act, David Osborne, the author of
the widely acclaimed book "Reinventing Government", testified
that,

Some of
the lessons from abroad and from State and local government tell us
that unless a legislature puts performance targets in its appropriations,
they will never be taken terribly seriously. You have to force legislators
who are appropriating money to define the outcomes that they want,
and I don't think that is mandatory in S. 20 * * * Unless it is done,
the performance reports will sit on the shelf.

As these
comments suggest, good management starts with clear policy direction,
and that is the responsibility of Congress. The failure of Congress
to establish program performance goals is an open invitation to program
abuse and mismanagement-and it makes objective oversight much more
difficult.

I do not
believe that requiring Congress to specify a few program performance
goals is unreasonable or infeasible-particularly if that requirement
is effected after the agencies have begun filing annual performance
reports. Congress has an obligation to tell the American taxpayers
what results we intend for the money we spend, and this requirement
should be included in the legislation.

I am hopeful
that this legislation will better enable the federal agencies to perform
their missions. However, I am concerned that we are creating additional
layers of central management controls that will make the job of the
federal manager and federal employee more difficult.

In 1983,
the National Academy of Public Administration issued a report entitled, "Revitalizing
Federal Management: Managers and Their Overburdened Systems." A
major them of the report was that our system is 'rigid, stultifying,
and burdened with red tape" to the extent that, according to the
managers surveyed, "their capacity to serve the public on a responsive
and low-cost basis is seriously undermined."

While the
Federal Managers Financial Integrity Act, the Chief Financial Officer
Act, and the continuing expansion of the role of Inspectors General
all are perhaps worthwhile initiatives on their own, I am not certain
that we have fully considered their cumulative impact.

My concern
is that by mandating yet another very specific layer of internal management
controls, performance measures and strategic plans, we are building
in even more rigidity. I realize that the legislation seeks to allow
flexibility in some pilot programs, but after years of watching these
well intended reforms transform into routine reports written by contractors
using largely boilerplate language, I am not convinced that this legislation
will actually enable federal agencies to improve their performance.

Harold
Seidman, a scholar at Johns Hopkins University, makes the valid observation
that there is a fundamental difference between State and local governments
and the Federal Government. He points out that much of the work of
local governments is service delivery, while this is only a small portion
of the work of government at the Federal level. In a recent article
in Government Executive magazine he states:

It's doubtful
that federal administrators will find the innovative methods employed
by Phoenix in contracting for garbage collection of much help in solving
their problems. If the objective is fundamentally to change the federal
government, service delivery is the wrong place to start.

There is
a basic difference between contracting for auto repair or janitorial
services and contracting for the administration of government programs
and the performance of government functions As Lester Salamon has noted,
governments face serious problems when they, in effect, delegate to
contractors "the exercise of discretion over the use of public
authority and spending of public funds."

In this
regard, I am glad that the Committee approved my amendment to prevent
private contractors from drafting the strategic plans and performance
reports. If this legislation is going to succeed, it will be because
the federal workforce sees it as an opportunity to exercise creativity
and initiative in their agencies, and not because management consultants
have gotten yet another opportunity to raid the Federal treasury and
produce glossy but unread reports.

Thus, the
intent of my amendment is to keep contractor involvement to an absolute
minimum and to develop the in-house expertise necessary to develop
and operate the performance measurement system in each agency.

In compliance
with paragraph 12 of rule XXVI of the Standing Rules of the Senate,
changes in existing law made by S. 20, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black brackets,
new material is printed in italic, existing law in which no change
is proposed is shown as roman):

(a) No
later than September 30, 1997, the head of each agency shall submit
to the Director of the Office of Management and Budget and to Congress
a strategic plan for program activities. Such plan shall contain-

(1) a comprehensive
mission statement covering the major functions and operations of the
agency;

(2) general
goals and objectives, including outcome-related goals and objectives,
for the major functions and operations of the agency;

(3) a description
of how the goals and objectives are to be achieved, including a description
of the operational processes, skills and technology, and the human,
capital, information, and other resources required to meet those goals
and objectives;

(4) a description
of how the performance goals included in the plan required by section
1115(a) of title 31 shall be related to the general goals and objectives
in the strategic plan;

(5) an
identification of those key factors external to the agency and beyond
its control that could significantly affect the achievement of the
general goals and objectives; and

(6) a description
of the program evaluations used in establishing or revising general
goals and objectives, with a schedule for future program evaluations.

(b) The
strategic plan shall cover a period of not less than five years forward
from the fiscal year in which it is submitted, and shall be updated
and revised at least every three years.

(c) The
performance plan required by section 1115 of title 31 shall be consistent
with the agency's strategic plan. A performance plan may not be submitted
for a fiscal year not covered by a current strategic plan under this
section.

(d) When
developing a strategic plan, the agency shall consult with the Congress
and shall solicit and consider the views and suggestions of those entities
potentially affected by or interested in such a plan.

(e) The
functions and activities of this section shall be considered to be
inherently Governmental functions. The drafting of strategic plans
under this section shall be performed only by Federal employees.

(f) For
purposes of this section the term 'agency' means an Executive agency
defined under section 105 and the United States Postal Service, but
does not include the Central Intelligence Agency, the General Accounting
Office, the Panama Canal Commission, the United States Postal Service,
and the Postal Rate Commission.

(a) During
the first 15 days for each regular session of Congress, the President
shall submit a budget of the United States Government for the following
fiscal year. Each budget shall include a budget message and summary
and supporting information. The president shall include in each budget
the following:

(1) * *
*

* * * *
* * *

(29) beginning
with fiscal year 1999, a Federal Government performance plan for the
overall budget as provided for under section 1115.

* * * *
* * *

Sec. 1115.
Performance plans

(a) In
carrying out the provisions of section 1105(a)(29), the Director of
the Office of Management and Budget shall require each agency to prepare
an annual performance plan covering each program activity set forth
in the budget of such agency. Such plan shall-

(1) establish
performance goals to define the level of performance to be achieved
by a program activity;

(2) express
such goals in an objective, quantifiable, and measurable form unless
authorized to be in an alternative form under subsection (b);

(3) briefly
describe the operational processes, skills and technology, and the
human, capital, information, or other resources required to meet the
performance goals;

(4) establish
performance indicators to be used in measuring or assessing the relevant
outputs, service levels, and outcomes of each program activity;

(5) provide
a basis for comparing actual program results with the established performance
goals; and

(6) describe
the means to be used to verify and validate measured values.

(b) If
an agency, in consultation with the Director of the Office of Management
and Budget, determines that it is not feasible to express the performance
goals for a particular program activity in an objective, quantifiable,
and measurable form, the Office of Management and Budget may authorize
an alternative form. Such alternative form shall-

(1) include
separate descriptive statements of-

(A)(i)
a minimally effective program, and (ii) a successful program, or

(B) such
alternative as authorized by the Director of the Office of Management
and Budget,

with sufficient
precision and in such terms that would allow for an accurate, independent
determination of whether the program activity's performance meets the
criteria of the description; or

(2) state
why it is infeasible or impractical to express a performance goal in
any form for the program activity.

(c) For
the purpose of complying with this section, an agency may aggregate,
disaggregate, or consolidate program activities, except that any aggregation,
disaggregation, or consolidation may not omit or minimize the significance
of any program activity constituting a major function or operation
for the agency.

(d) An
agency may prepare a classified or non-public annex to its plan covering
program activities or parts of program activities relating to-

(1) national
security;

(2) the
conduct of foreign affairs; or

(3) the
avoidance of interference with criminal prosecution or revenue collection.

(e) The
functions and activities of this section shall be considered to be
inherently Governmental functions. The drafting of performance plans
under this section shall be performed only by Federal employees.

(f) For
purposes of this section and section 1116 through 1119, and sections
9703 and 9704, the term-

(1)
"agency" has the same meaning as such term is defined under
section 306(f) of title 5;

(2)
"outcome measure" means an assessment of the results of a program
activity compared to its intended purpose:

(3)
"output measure" means the tabulation, calculation, or recording
of activity or effort and can be expressed in a quantitative or qualitative
manner;

(4)
"performance goal" means a target level of performance expressed
as a tangible, measurable objective, against which actual achievement
can be compared, including a goal expressed as a quantitative standard,
value, or rate;

(5)
"performance indicator" means a particular value or characteristic
used to measure output or outcome.

(6)
"program activity" means a specific activity or project as
listed in the program and financing schedules of the annual budget of
the United States Government; and

(7)
"program evaluation" means an assessment, through objective
measurement and systematic analysis, of the manner and extent to which
Federal programs achieve intended objectives.

Sec. 1116.
Program performance reports

(a) No
later than March 31, 2000, and no later than March 31, of each year
thereafter, the head of each agency shall prepare and submit to the
President and the Congress, a report on program performance of the
previous fiscal year.

(b)(1)
Each program performance report shall set forth the performance indicators
established in the agency performance plan under section 1115, along
with the actual program performance achieved compared with the performance
goals expressed in the plan for that fiscal year.

(2) If
the performance goals are specified in an alternative form pursuant
to section 1115(b) the results of such program shall be described in
relation to such specifications, including whether the performance
failed to meet the criteria of a minimally effective or successful
program.

(c) The
report for fiscal year 2000 shall include actual results for the preceding
fiscal year, the report for fiscal 2001 shall include actual results
for the two preceding fiscal years, and the report for fiscal year
2002 and all subsequent reports shall include actual results for the
three preceding fiscal years.

(d) Each
report shall-

(1) review
the success of achieving the performance goals of the fiscal year;

(2) evaluate
the performance plan for the current fiscal year relative to the performance
achieved toward the performance goals in the fiscal year covered by
the report;

(3) explain
and describe, where a performance goal has not been met (including
when a program activity's performance is determined not to have met
the criteria of a successful program activity section 1115(b)(1)(A)(ii)
or a corresponding level of achievement if another alternative form
is used)-

(A) why
the goal was not met;

(B) those
plans and schedules for achieving the established performance goal;
and

(C) if
the performance goal is impractical or infeasible, why that is the
case and what action is recommended;

(4) describe
the use and assess the effectiveness in achieving performance goals
of any waiver under section 9703 of this title; and

(5) include
the summary findings of those program evaluations completed during
the fiscal year covered by the report.

(e) An
agency head may include all program performance information required
annually under this section in an annual financial statement required
under section 3515 if any such statement is submitted to the Congress
no later than March 31 of the applicable fiscal year.

(f) The
functions and activities of this section shall be considered to be
inherently Governmental functions. The drafting of reports on program
performance under this section shall be performed only by Federal employees.

Sec. 1117.
Exemption

The Director
of the Office of Management and Budget may exempt from the requirements
of section 1115 and 1116, of this title and section 306 of title 5,
any agency with annual outlays of $20,000,000 or less.

Sec. 1118.
Pilot projects for performance goals

(a) The
Director of the Office of Management and Budget, after consultation
with the head of each agency, shall designate not less than ten agencies
as pilot projects in performance measurement for fiscal years 1994,
1995, and 1996. The selected agencies shall reflect a representative
range of Government functions and capabilities in measuring and reporting
program performance.

(b) Pilot
projects in the designated agencies shall undertake the preparation
of performance plans under section 1115, and program performance reports
under section 1116, other than section 1116(c), for one or more of
the major functions and operations of the agency. A strategic plan
shall be used when preparing agency performance plans during one or
more years of the pilot period.

(c) No
later than May 1, 1997, the Director of the Office of Management and
Budget shall submit a report to the President and to the Congress which
shall-

(1) assess
the benefits, costs, and usefulness of the plans and reports prepared
by the pilot agencies in meeting the purposes of the Government Performance
and Results Act of 1993,

(2) identify
any significant difficulties experienced by the pilot agencies in preparing
plans and reports; and

(3) set
forth any recommended changes in the requirements of the provisions
of Government Performance and Results Act of 1993, section 306 of title
5, sections 1105, 1115, 1116, 1117, 1119 and 9703 of this title, and
this section.

Sec. 1119.
Pilot projects for performance budgeting

(a) The
Director of the Office of Management and Budget, after consultation
with the head of each agency, shall designate not less than five agencies
as pilot projects in performance budgeting for fiscal years 1998 and
1999. At least three of the agencies shall be selected from those designated
as pilot projects under section 1118, and shall also reflect a representative
range of Government functions and capabilities in measuring and reporting
program performance.

(b) Pilot
projects in the designated agencies shall cover the preparation of
performance budgets. Such budgets shall present, for one or more of
the major functions and operations of the agency, the varying levels
of performance, including outcome- related performance, that would
result from different budgeted amounts.

(c) The
Director of the Office of Management and Budget shall include, as an
alternative budget presentation in the budget submitted under section
1105 for fiscal year 1999, the performance budgets of the designated
agencies for this fiscal year.

(d) No
later than March 31, 2001, the Director of the Office of Management
and Budget shall transmit a report to the President and to the Congress
on the performance budgeting pilot projects which shall-

(1) assess
the feasibility and advisability of including a performance budget
as part of the annual budget submitted under section 1105;

(2) describe
any difficulties encountered by the pilot agencies in preparing a performance
budget;

(3) recommend
whether legislation requiring performance budgets should be proposed
and the general provisions of any legislation; and

(4) set
forth any recommended changes in the other requirements of the Government
Performance and Results Act of 1993, section 306 of title 5, sections
1105, 1115, 1116, 1117, and 9703 of this title, and this section.

(e) After
receipt of the report required under subsection (d), the Congress may
specify that a performance budget be submitted as part of the annual
budget submitted under section 1105.

* * * *
* * *

CHAPTER
97. MISCELLANEOUS

Sec.

9701. Fees
and charges for Government services and things of value. 9702. Investment
of trust funds 9703. Managerial accountability and flexibility 9704.
Pilot projects for managerial accountability and flexibility.

* * * *
* * *

Sec. 9703.
Managerial accountability and flexibility

(a) Beginning
with fiscal year 1999, the performance plans required under section
1115 of this title may include proposals to waive administrative procedural
requirements and controls, including specification of personnel staffing
levels, limitations on compensation or remuneration, and prohibitions
or restrictions on funding transfers among budget object classification
20 and subclassifications 11, 12, 31, and 32 of each annual budget
submitted under section 1105 in return for specific individual or organization
accountability to achieve a performance goal. In preparing and submitting
the performance plan under section 1105(a)(29), the Director of the
Office of Management and Budget shall review and may approve any proposed
waivers. A waiver shall take effect at the beginning of the fiscal
year for which the waiver is approved.

(b) Any
such proposal under subsection (a) shall describe the anticipated effects
on performance resulting from greater managerial or organizational
flexibility, discretion, and authority, and shall quantify the expected
improvements in performance resulting from any waiver. The expected
improvements shall be compared to current actual performance, and to
the projected level of performance that would be achieved independent
of any waiver.

(c) Any
proposal waiving limitation on compensation or remuneration shall precisely
express the monetary change in compensation or remuneration amounts,
such as bonuses or awards that shall result from meeting, exceeding,
or failing to meet performance goals.

(d) Any
proposed waiver of procedural requirements or controls imposed by an
agency (other than the proposing agency or the Office of Management
and Budget) may not be included in a performance plan unless it is
endorsed by the agency that established the requirement, and the endorsement
included in the proposing agency's performance plan.

(e) A waiver
shall be in effect for one or two years, as specified by the Director
of the Office of Management and Budget. A waiver may be renewed for
a subsequent year. After a waiver has been in effect for three consecutive
years, the performance plan prepared under section 1115 may propose
that a waiver, other than a waiver of limitations on compensation or
remuneration, be made permanent.

(f) For
purposes of this section, the definitions under section 1115(f) shall
apply.

(a) The
Director of the Office of Management and Budget shall designate not
less than five agencies as pilot projects in managerial accountability
and flexibility for fiscal years 1995 and 1996. Such agencies shall
be selected from those designated as pilot projects under section 1118
and shall reflect a representative range of Government functions and
capabilities in measuring and reporting program performance.

(b) Pilot
projects in the designated agencies shall include proposed waivers
in accordance with section 9703 for one or more of the major functions
and operations of the agency.

(c) The
Director of the Office of Management and Budget shall include in the
report to the President and to the Congress required under section
1118(c)-

(1) an
assessment of the benefits, costs, and usefulness of increasing managerial
and organizational flexibility, discretion, and authority in exchange
for improved performance through a waiver; and

(2) an
identification of any significant difficulties experienced by the pilot
agencies in preparing proposed waivers.

(d) For
purposes of this section the definitions under section 1115(f) shall
apply.

(1)
"outcome measure" refers to an assessment of the results of
a program activity compared to its intended purpose;

(2)
"output measure" refers to the tabulation, calculation, or
recording of activity or effort and can be expressed in a quantitative
or qualitative manner;

(3)
"performance goal" means a target level of performance expressed
as a tangible, measurable objective, against which actual achievement
shall be compared, including a goal expressed as a quantitative standard,
value, or rate;

(4)
"performance indicator" refers to a particular value or characteristic
used to measure output or outcome;

(5)
"program activity" means a specific activity related to the
mission of the Postal Service; and

(6)
"program evaluation" means an assessment, through objective
measurement and systematic analysis, of the manner and extent to which
Postal Service programs achieve intended objectives.

Sec. 2802.
Strategic plans

(a) No
later than September 30, 1997, the Postal Service shall submit to the
President and the Congress a strategic plan for its program activities.
Such plan shall contain-

(1) a comprehensive
mission statement covering the major functions and operations of the
Postal Service;

(2) general
goals and objectives, including outcome-related goals and objectives,
for the major functions and operations of the Postal Service;

(3) a description
of how the goals and objectives are to be achieved, including a description
of the operational processes, skills and technology, and the human,
capital, information, and other resources required to meet those goals
and objectives;

(4) a description
of how the performance goals included in the plan required under section
2803 shall be related to the general goals and objectives in the strategic
plan;

(5) an
identification of those key factors external to the Postal Service
and beyond its control that could significantly affect the achievement
of the general goals and objectives; and

(6) a description
of the program evaluations used in establishing or revising general
goals and objectives, with a schedule for future program evaluations.

(b) The
strategic plan shall cover a period of not less than five years forward
from the fiscal year in which it is submitted, and shall be updated
and revised at least every three years.

(c) The
performance plan required under section 2803 shall be consistent with
the Postal Service's strategic plan. A performance plan may not be
submitted for a fiscal year not covered by a current strategic plan
under this section.

(d) When
developing a strategic plan, the Postal Service shall solicit and consider
the views and suggestions of those entities potentially affected by
or interested in such a plan, and shall advise the Congress of the
contents of the plan.

Sec. 2803.
Performance plans

(a) The
Postal Service shall prepare an annual performance plan covering each
program activity set forth in the Postal Service budget, which shall
be included in the comprehensive statement presented under section
2401(g) of this title. Such plan shall-

(1) establish
performance goals to define the level of performance to be achieved
by a program activity;

(2) express
such goals in an objective, quantifiable, and measurable form unless
an alternative form is used under subsection (b);

(3) briefly
describe the operational processes, skills and technology, and the
human, capital, information, or other resources required to meet the
performance goals;

(4) establish
performance indicators to be used in measuring or assessing the relevant
outputs, service levels, and outcomes of each program activity;

(5) provide
a basis for comparing actual program results with the established performance
goals; and

(6) describe
the means to be used to verify and validate measured values.

(b) If
the Postal Service determines that it is not feasible to express the
performance goals for a particular program activity in an objective,
quantifiable, and measurable form, the Postal Service may use an alternative
form. Such alternative form shall-

(1) include
separate descriptive statements of-

(A) a minimally
effective program, and

(B) a successful
program,

with sufficient
precision and in such terms that would allow for an accurate, independent
determination of whether the program activity's performance meets the
criteria of either description; or

(2) state
why it is infeasible or impractical to express a performance goal in
any form for the program activity.

(c) In
preparing a comprehensive and informative plan under this section,
the Postal Service may aggregate, disaggregate, or consolidate program
activities, except that any aggregation, disaggregation, or consolidation
may not omit or minimize the significance of any program activity constituting
a major function or operation.

(d) The
Postal Service may prepare a non-public annex to its plan covering
program activities or parts of program activities relating to-

(1) the
avoidance of interference with criminal prosecution; or

(2) matters
otherwise exempt from public disclosure under section 401(c) of this
title.

Sec. 2804.
Program performance reports

(a) The
Postal Service shall prepare a report on program performance for each
fiscal year, which shall be included in the annual comprehensive statement
presented under section 2401(g) of this title.

(b)(1)
The program performance report shall set forth the performance indicators
established in the Postal Service performance plan, along with the
actual program performance achieved compared with the performance goals
expressed in the plan for that fiscal year.

(2) If
performance goals are specified by specified by descriptive statements
of a minimally effective program activity and a successful program
activity, the results of such program shall be described in relationship
to those categories, including whether the performance failed to meet
the criteria of either category.

(c) The
report for fiscal year 2000 shall include actual results for the preceding
fiscal year, the report for fiscal year 2001 shall include actual results
for the two preceding fiscal years, and the report for fiscal year
2002 and all subsequent reports shall include actual results for the
three preceding fiscal years.

(d) Each
report shall-

(1) review
the success of achieving the performance goals of the fiscal year;

(2) evaluate
the performance plan for the current fiscal year relative to the performance
achieved towards the performance goals in the fiscal year covered by
the report;

(3) explain
and describe, where a performance goal has not been met (including
when a program activity's performance is determined not to have met
the criteria of a successful program activity under section 2803(b)(2))-

(A) why
the goal was not met;

(B) those
plans and schedules for achieving the established performance goal;
and

(C) if
the performance goal is impractical or infeasible, why that is the
case and what action is recommended; and

(4) include
the summary findings of those program evaluations completed during
the fiscal year covered by the report.

Sec. 2805.
Inherently Governmental functions

The functions
and activities of this chapter shall be considered to be inherently
Governmental functions. The drafting of strategic plans, performance
plans, and performance reports shall be performed only by employees
of the Postal Service.